Privately Owned Business vs. Publicly Owned Business

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Difference between Privately Owned Business and Publicly Owned Business

When the subject of privately-owned businesses and publicly-owned businesses comes up, many people automatically assume that one is better than the other based on a few factors. The fact of the matter is that each of these types of business ownership comes with its own unique set of advantages and disadvantages and the decision to go with one in preference to the other should be made taking specific needs and circumstances into consideration. Your decision to go with one or the other can have a significant effect on your businesses future, so a look into their strengths and drawbacks is worthwhile.

Privately Owned Business
Publicly Owned Business

Ownership

A privately-owned business is, as you may have guessed, owned by a private individual or a group of private individuals. In most cases, the owners of the company in question are the same people who founded the company or those who manage it. Some privately-owned businesses are owned by a group of investors.

Publicly-owned businesses are so named because part of the company is actually in the ownership of the public. This is the result of a sale of its stock, essentially allowing buyers to claim a portion of the assets and profits of the company in question.

Disclosure

The main difference between publicly-owned businesses and privately-owned businesses lies in public disclosure. A company that goes "public" is basically offering its shares for purchase on the stock market. Publicly-owned businesses will also have to report their earnings to the Securities and Exchange Commission four times a year. Privately-owned business on the other hand won't have to divulge their financial information to the SEC, since their stocks aren't traded on the stock exchange.

Advantages and Disadvantages

Publicly-owned businesses have a distinct advantage over privately-owned businesses in that they have a lot more opportunities to raise funds by selling off stock and/or bonds. This allows the business owners to implement expansion projects more easily.

As for a privately-owned business, the fact that the owners don’t have to disclose financial information is a definite advantage, although this is offset by the comparatively fewer options for financing. This can result in more costs and limited expansion options.

Summary

Privately owned

  • Owned by private individuals, often the founder or manager, or a board of investors
  • Are not required by law to publicize their financial information since their stocks aren't up for bids in the stock exchange
  • Management is not answerable to stockholders
  • Private funding as the main source of capital means higher rates and limited expansion options

Publicly-Owned Businesses

  • Partly owned by the public as a result of sales of its stock
  • Allows stockholders to claim part of the company's assets and profits
  • Stocks are traded on the stock exchange
  • Is required to file reports of its earnings every quarter
  • May raise capital by selling stocks and/or bonds

Which type of business is better in this economy?
  • Privately Owned Business
  • Publicly Owned Business
 
 

Discuss It: comments 2

  • Guest
  • share tips wrote on June 2011

Very good post, I was really searching for this topic, as I wanted this

topic to understand completely and it is also very rare in internet,

that is why it was very difficult to understand.

Thank you for sharing this.

regards:

share

tips

  • Guest
  • Monte McKenzie wrote on April 2012

This is nonsense: all companies owned by personal investment whether by an individual or several individuals "as in a stock company" or owned by a single person or partnership are all privately owned companies. "Publicly ,owned companies are natural monopoly products & services that better serve the public interist when owned by the people they serve! " Are Publicly Owned " When ever private investors control a natural monopoly or service, society is in conflict with itself! Investor's interists are not those of the people served by the utility and therefore must be somehow "regulated by a Government intity! Which is never without conflict of interist problems and alwayse results in pursuing of benefits for the investors at the expense of the interists of the persons served. Those who use the utilites products. All utilities better serve the interists of society when controled by the people benefiting form the product! Those that get and own a service or utility or benefit from and recieve produce like city water or gas or electric or... Word smiths try to confuse the issue by making an issue of the wording of Public Ownership vs Private ownership. As ..."publicly owned stock Companies" are not Publicly owned Companies! They are owned by single persons or groups with various ownership credentials but are not necessarily the people who use and benefit from the product or dervice.

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