A private company is owned entirely by a relatively small group of individuals or other entities providing capital. By definition, private companies don't raise money by selling shares to the public; funding sources could include the company's founders, investors close to the founders, banks, and funds that specifically invest in private companies.
A privately held company has more flexibility in how it operates because it answers to fewer masters than a public one. The group with money on the line is restricted and select. A private company does not have to offer up detailed information on how it's faring for public and government scrutiny, as do public companies under the regulations of the Securities and Exchange Commission.
Companies can go from private to public, by selling shares to the public, often as a way to raise a large amount of money. In reverse, public companies can be taken private if, for example, a majority owner wants to consolidate control.
A private company does not have shares of stock listed on an exchange for public sale, so it is not capable of being publicly traded in the secondary market.
SC Johnson -- A Family Company, with brands such as Johnson's Wax, Pledge, Fantastik, Scrubbing Bubbles, Ziploc and Windex, is an example of a well-known private company. It was founded in 1886 and remains family owned. Another is Cargill, famous as a grain trader.
Compare: public corporation
Related Fool Articles
Recent Mentions on Fool.com
- Waiting for Profitability at Genomic Health, Inc.
- 5 Things US Ecology Management Wants You to Know
- Why Is Honda Building a $4.5 Million Private Jet?
- Berkshire Weekend 2015 Review
- TransDigm Group Earnings Fly Higher as Guidance Points Upward
- What Investors Need to Know About the Bojangles' IPO
- Why Investors Are Short-Selling This Las Vegas Casino
- 3 Reasons Why It's Smart to Ignore Wall Street's Analyst Ratings
- I'm Breaking Some of My Own Rules and Buying Etsy Stock
- 15 Things to Expect at Berkshire Hathaway's Annual Meeting This Weekend
- 3 Things to Watch in Main Street Capital Corporation's Earnings
- The Internet of Things is About to Solve Biotech's Oldest Problem