A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets but rather the company's stock is offered, owned, traded, exchanged privately, or over-the-counter. In the case of a closed corporation (or closely held corporation), there are relatively few shareholders or company members. Related terms are unquoted company and unlisted company.
They are less visible and may be less popular than their publicly traded counterparts, but private companies have major importance in the world's economy. In 2008, the 441 largest private companies in the United States accounted for $1.8 trillion in revenues and employed 6.2 million people, according to Forbes. In 2005, using a substantially smaller pool size (22.7%) for comparison, the 339 companies on Forbes survey of closely held U.S. businesses sold a trillion dollars' worth of goods and services (44%) and employed four million people. In 2004, the Forbes count of privately held U.S. businesses with at least $1 billion in revenue was 305.
Separately, all non-government-owned companies are considered private enterprises. That meaning includes both publicly traded and privately held companies since their investors are individuals in the private sector.
State ownership vs. private ownership vs. cooperative ownership
Private ownership of productive assets differs from state ownership or collective ownership (as in worker-owned companies). This usage is often found in former Eastern Bloc countries to differentiate from former state-owned enterprises, but it may be used anywhere when contrasting to a state-owned or a collectively owned company.
In the United States, the term privately held company is more often used to describe for-profit enterprises whose shares are not traded on the stock market.
Ownership of stock
In countries with public trading markets, a privately held business is generally taken to mean one whose ownership shares or interests are not publicly traded. Often, privately held companies are owned by the company founders or their families and heirs or by a small group of investors. Sometimes employees also hold shares in private companies. Most small businesses are privately held.
Subsidiaries and joint ventures of publicly traded companies (for example, General Motors' Saturn Corporation), unless shares in the subsidiary itself are traded directly, have characteristics of both privately held companies and publicly traded companies. Such companies are usually subject to the same reporting requirements as privately held companies, but their assets, liabilities, and activities are also included in the reports of their parent companies, as required by the accountancy and securities industry rules relating to groups of companies.
Form of organization
Private companies may be called corporations, limited companies, limited liability companies, unlimited companies, or other names, depending on where and how they are organized and structured. In the United States, but not generally in the United Kingdom, the term is also extended to partnerships, sole proprietorships or business trusts. Each of these categories may have additional requirements and restrictions that may impact reporting requirements, income tax liabilities, governmental obligations, employee relations, marketing opportunities, and other business obligations and decisions.
In many countries, there are forms of organization that are restricted to and are commonly used by private companies, for example, the private company limited by shares in the United Kingdom (abbreviated Ltd) or unlimited company and the proprietary limited company (abbreviated Pty Ltd) or unlimited proprietary company (abbreviated Pty) in South Africa and Australia.
In India, private companies are registered by the Registrar of Companies, under the Ministry of Corporate Affairs. Indian private companies must contain the word Private Limited at the end of their names.