A company can be private or public. A private company is owned by a single person or a closed group, and it has less regulation than a public entity. On the other hand, as it says in its name, a public company is publicly owned and must follow tougher regulations.
Private Company
The ownership of private companies rests with an individual or group of individuals. Most of the time it is held by family members or founding members.
Private companies are not listed in the stock market and rely on private funding. However, they can sell a limited number of stocks without registering with the SEC (Securities and Exchange Commission) and can borrow funding from banks and venture capitalists, if required.
The benefit of privately owned companies is that they are not answering to the public, don’t have to disclose their earnings, and require less government scrutiny.
Examples of Private Company
Examples of privately owned companies are:
- IKEA
- Koch Industries
- Deloitte
- LEGO
- KPMG
- Ernst & Young
- PricewaterhouseCoopers
Public Company
As the name suggests, the public owns these companies. These companies are listed on the stock market and can freely purchase and sell stocks. Public companies can easily tap the market by selling stocks and bonds.
Public companies require closed government scrutiny, quarterly and yearly earnings disclosures, and regular board meetings.
In public companies, all shareholders can express their opinion on any issue and take part in voting.
Examples of Public Company
Examples of public-owned companies are:
- Amazon
- Tesla
- Apple
- Microsoft
Private Vs Public Company
The key difference between these types of companies are as follows:
- The owner of a public company is the public, while private individuals own a private company.
- Private companies face fewer legal requirements than public companies.
- Private companies can approach banks for funding, while public companies can get funds from the public through bonds or stocks.
Summary
An individual or private investor owns a private company, and the public owns a public company. This is the key difference between these two types of companies. The public owns the stocks of a public company, and public companies must disclose quarterly and yearly results. A private company is not required to disclose earnings.