Define Private Corporation

Private corporations are held by small groups of investors.

A private corporation, more commonly called a privately-held company, is a company whose shares are not traded on the stock market. A small group of investors or shareholders owns the company's shares.

Company Shares

A share represents a portion of ownership in a company. Both private and public companies sell shares to generate operating capital to start or grow the business.

Privately-held Companies

Investors receive profits if the company's value increases through revenue and income.

Shares in privately-held companies are sold to a select group of individuals. The sale of shares raises capital needed to start a new business or to grow an established business. These shares are not traded on the stock market.

Publicly-traded Companies

Stock value is based on what investors are willing to pay.

Publicly-traded companies represent those companies whose stock is traded on the open stock market, such as New York Stock Exchange or NASDAQ. Anyone can buy and sell publicly-traded shares. Shareholders receive either dividends on the stock, an increased value or a combination of both.

Going Public

Going public refers to privately-held companies who decide to offer shares of themselves on the open market to raise equity and funding. The company makes an initial public offering (IPO) allowing investors to purchase blocks of stock in the company.

References

• "American Heritage Dictionary of Business Terms"; David L. Scott, PhD; 2009
• Your Dictionary: Privately-held Company
• Investor Words: Private Company
• Your Dictionary: Public Company

Resources

• "Standard & Poor's Guide to Money and Investing"; Virginia Morris and Kenneth Morris; 2005