A private corporation, also known as a privately held corporation, is a business that has been incorporated but is not publicly traded. Like a publicly traded company, a private corporation may have multiple shareholders, and it must file articles of incorporation in its state of operation. The number of owners is usually much smaller than with a publicly traded company.
Purpose of Private Corporation
A private corporation is a way for multiple investors to share in the risk of owning a business. Family businesses with multiple owners sometimes establish as a corporation. The corporation is treated as a separate entity from its owners, which minimizes individual liability. When the business is successful, owners receive income distributions in the form of dividends. One drawback of setting up a private corporation is that the business gets taxed before earnings are distributed, which means owners must pay taxes on their income.
A major difference between a private corporation and a publicly traded one is that private companies don't have to disclose financial information to the public. Publicly traded companies are required to present earnings reports every quarter as well as annually to the public, and must file documents with the U.S. Securities and Exchange Commission.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.