Private company

A private company is one which is not publicly traded on any stock exchange.

Expanded Definition

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

• Private vs. Public

Related Terms

• Closely-held corporation
• Corporation

Recent Mentions on Fool.com

• Top 10 Cities for College Graduates
• The Financial Appeal of an Obamacare Repeal
• Ratings Firm Warns of Economic Slowdown in Russia
• Tesla to Raise Up to $830 Million in Stock and Bond Offerings
• Northrop Grumman Expands Stock Buybacks
• A Closer Look at 5 FTSE Boardrooms

• Here's What Warren Buffett Has Been Buying and Selling
• Two Botched Leveraged Buyouts and the First Modern Philanthropist
• This Week in Utilities: Privatization Possibilities and the Most Powerful Wind Turbine Yet
• The Buffett Era Begins
• The Men and Women Who Run Eurasian Natural Resources Corporation
• 3 Companies Muffling Shareholders' Voices