Legal Definitions - private company

A private company is a business entity whose ownership shares or other investment interests are not bought and sold on public stock exchanges. Unlike public companies, private companies do not offer their securities to the general public through markets like the New York Stock Exchange or NASDAQ. This means their ownership is typically held by a smaller group of individuals, families, or private investors.

Private companies can take various legal forms, such as sole proprietorships, partnerships, or corporations, and can vary greatly in size, from small local businesses to large multinational corporations. While they cannot raise capital by selling shares to the public, they can secure funding through private agreements with specific investors or financial institutions, a process known as a private placement.

• Example 1: Local Family Restaurant

  Imagine "The Corner Bistro," a popular restaurant owned and operated solely by a husband and wife. They started the business with their own savings and a bank loan. They don't sell shares to customers or on any stock market.

  How it illustrates the term: The ownership of The Corner Bistro is entirely private. The husband and wife are the sole owners, and there are no publicly traded shares, meaning the general public cannot buy a stake in their business through a stock exchange.

• Example 2: Growing Tech Startup

  Consider "Quantum Innovations," a software development company that has created a groundbreaking new app. The company has grown significantly and has received investments from a few venture capital firms in exchange for a percentage of ownership. However, its shares are not listed on any stock exchange.

  How it illustrates the term: Quantum Innovations is a private company because its shares are held by its founders and a select group of private investors (the venture capital firms). The company has not offered its shares to the general public, even though it has raised substantial capital through private agreements.

• Example 3: Large, Established Manufacturing Business

  "Global Textiles Inc." is a large company that manufactures fabrics for various industries worldwide. It has thousands of employees and multiple factories across several countries. Despite its size and international reach, the company has been owned by the same founding family for over a century, and its shares have never been made available for purchase on a public stock market.

  How it illustrates the term: Global Textiles Inc. exemplifies a private company because, despite its significant scale and global operations, its ownership remains concentrated within a private group (the founding family). Its shares are not traded publicly, distinguishing it from a public company of similar size.