Wall Street
Corporations are classified as either public or private based on whether they sell stock to the general public and trade that stock on an exchange.
Features
Public corporations sell stock to the public on an exchange. In private companies, the senior management, key employees, and other individuals closely associated with the business are typically the stockholders.
Process
Corporations become public by filing necessary paperwork with the United States Securities and Exchange Commission (SEC) to have an initial public offering (IPO).
Purpose
Corporate leaders often choose to take a company public in order to gain an influx of money that can be used to further business goals and increase retention of quality employees and managers.
Accountability
Public companies must respond to the demands of the general public stockholders and are required to file specific reports with the SEC. Private companies do not have the same obligations to divulge business information.
Significance
Choosing to remain private or go public as a corporation can make a large difference in terms of future profits, marketability, and reputation.
