Private company versus publicly listed company – what is the difference

A company can be classified as private or publicly listed based on whether it’s stocks can be traded in financial markets or not. Organizations whose shares are traded in the financial markets (stock exchanges) are known as publicly listed companies. Organizations whose shares can’t be traded in the financial market is referred to as a private or closely held companies.

Stocks of a publicly listed company can be traded in the financial markets. Here are the differences between publicly and privately traded companies;

  • Publicly traded company’s shares are marketable as investors can easily buy or sell the shares in the financial market. In privately held companies, you have restrictions in buying and selling of shares to the general public.
  • For public listed companies, it’s easier to raise new capital by issuing more shares to the general public as they already have access to the market. Private companies can’t do this as they have restrictions to raise capital from the general public. However, they can approach venture capitalists and angel investors to raise capital.
  • A public company is required to file its financial statements with various agencies such as stock exchanges, government departments and publish it to various stakeholders. Private companies are not required to publish its financial statements to outsiders, but, they are required to file financial statements with the government according to the rules and regulations of the country.
  • Due to additional compliance in public companies, legal and accounting costs will be higher in comparison to other organizations.
  • Confidentiality for a public company is generally higher than a private company as they are required to disclose various legal information to various stakeholders.

A company has flexibility to change their status from public to private or private to public. If your organization is registered as a private company and you want your shares to be listed in the financial market, the first thing you have to do is to convert it from private to public.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.