Difference Between Private And Public Company With Example ?

Difference Between Private And Public Company

Private and public companies differ primarily in their ownership structure, regulatory requirements, and access to capital markets.

1. Ownership:

   Private Company: Ownership of a private company is typically limited to a few individuals, founders, or investors. Shares are not publicly traded, and the company's stock is not available for purchase by the general public.

   Public Company: A public company, on the other hand, sells its shares to the general public through a stock exchange or over-the-counter market. Ownership is distributed among a large number of shareholders, and shares are freely traded.

2. Regulatory Requirements:

   Private Company: Private companies have fewer regulatory obligations compared to public companies. They are not required to disclose financial information to the same extent as public companies and are subject to less stringent reporting and governance standards.

   Public Company: Public companies are subject to extensive regulatory requirements enforced by government agencies such as the Securities and Exchange Commission (SEC) in the United States. They must adhere to strict financial reporting standards, disclose information about their operations, financial performance, executive compensation, and other key aspects of their business.

3. Access to Capital:

   

Private Company: Private companies typically rely on private funding sources such as venture capital, private equity, or bank loans to finance their operations and growth. They have limited access to capital compared to public companies but enjoy greater flexibility and autonomy in decision-making.

   Public Company: Public companies have access to a broader range of financing options, including equity financing through the sale of shares to investors in the public markets. They can raise substantial amounts of capital more easily than private companies but are also subject to market volatility and shareholder scrutiny.

Example:

Private Company: Mars, Incorporated, the global candy and pet food giant, is a famous example of a private company. It's owned by the Mars family and is not traded on any stock exchange.

Public Company: Apple Inc. is a well-known public company. Its shares are traded on the NASDAQ stock exchange, and it has millions of shareholders worldwide. Apple is subject to rigorous financial reporting requirements and is closely watched by investors and regulators.