Often in business the terms ‘public’ and ‘private’ are thrown around when describing certain companies, but what do these terms mean?
A public company is a company that has sold a portion of itself to the public via an initial public offering of some of its stock. Those that purchase the stock are known as shareholders and have claim to part of the company’s assets and profits.
A private company is owned by its founders, management or a group of private investors. Using money which is not sourced directly from the public.
These two types of companies differentiate in the way they disclose their financial information to the public. As public companies are part owned by shareholders they are required by law to file quarterly earnings reports (among other things) to the Securities and Exchange Commission (SEC). Private companies are not required to do this since they do not trade stock on a stock exchange.