Privately held company
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The term privately held company or close corporation refers to the ownership of a business company in two different ways: first, referring to ownership by non-governmental organizations; and second, referring to ownership of the company's stock by a relatively small number of holders who do not trade the stock publicly on the stock market. Less ambiguous terms for a privately held company are unquoted company and unlisted company.
Though less visible than their publicly traded counterparts, private companies have a major importance in the world's economy. In 2008, the 441 largest private companies in the USA accounted for $1.8 trillion in revenues and employed 6.2 million people, according to Forbes. In 2005, the 339 companies on Forbes' survey of closely held U.S. businesses sold a trillion dollars' worth of goods and services and employed 4 million people. In 2004, the Forbes' count of privately held U.S. businesses with at least $1 billion in revenue was 305.[1]
Koch Industries, Bechtel, Cargill, Chrysler, PricewaterhouseCoopers, Pilot Travel Centers, Ernst & Young, Publix, Deloitte Touche Tohmatsu and Mars are among the largest privately held companies in the United States. IKEA, Victorinox, and Bosch are examples of Europe's largest privately held companies.
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[edit] State ownership vs. private ownership
In the broadest sense, the term private corporation refers to any business not owned by the state. This usage is often found in former Communist countries to differentiate from former state-owned enterprises,[citation needed] but it may be used anywhere when contrasting to a state-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.
[edit] Ownership of stock
In countries with public trading markets, a privately held business company 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 and/or their families and heirs or by a small group of investors. Sometimes employees also hold shares of private companies. Most small businesses are privately held. In the United States a few notable large corporations, such as Koch Industries, HEB, Cargill, Swagelok, Wegmans, Kohler, Mars, and Bechtel are privately held, as are large professional services firms, such as accounting and law firms.
Subsidiaries and joint ventures of publicly traded companies (for example, General Motors' Saturn Corporation), unless shares in the subsidiary itself are traded directly, share 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.
[edit] Form of organization
Private companies may be called corporations, limited companies, limited liability companies, or other names, depending on where and how they are organized. 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 decisions.
In many countries, there are forms of organization which are restricted to and are commonly used by private companies, for example the private company limited by shares in the United Kingdom (abbreviated Ltd) and the proprietary limited company (abbreviated Pty Ltd) in Australia.
[edit] Reporting obligations and restrictions
Privately held companies generally have fewer or less comprehensive reporting requirements for transparency, via annual reports, etc. than do publicly traded companies. For example, in the United States, unlike in Europe, privately held companies are not generally required to publish their financial statements. In Australia, Part 2E of the Corporations Act 2001 requires that publicly traded companies file certain documents relating to their annual general meeting with the Australian Securities and Investments Commission, while there is no similar requirement for privately held companies.
Privately held companies also sometimes have restrictions on how many shareholders they may have. For example, the U.S. Securities Exchange Act of 1934, section 12(g), limits a privately held company, generally, to fewer than 500 shareholders, and the U.S. Investment Company Act of 1940, requires registration of investment companies that have more than 100 holders. In Australia, section 113 of the Corporations Act 2001 limits a privately held company to fifty non-employee shareholders.
[edit] India
In India, the term private limited or in short PL is used after a name of a company which is privately held unlike public companies which use the word limited only.
[edit] See also
- Private company limited by shares (private limited company)
- Private equity
- Public company
[edit] References
[edit] External links
- Forbes.com: America's Largest Private Companies
- Internationalbusinessreport.com, Examining the thoughts and opinions of privately held businesses
