Characteristics of Private Company

Characteristics of Private Company

In this article we would discuss the characteristics of a private company.

Important Characteristics of Private Company

Some important characteristics of private companies include limited number of share holders, limited liability of shareholders and restricted transfer of shares. These characteristic have been briefly explained below

1.   Limited Shareholders

First important characteristic of Private company is the number of shareholder. A private company owned by few shareholders. The number of shareholder allowed in a private company varies contrary to country; typically this limit has a range from 20 to 50.

2.   Setting up process

Second important characteristic of Private company is less formal process of setting up and winding up . The setting up process of a public company is much more formal and complex. 

3.   Liability is Limited

Private company has limited liability of the shareholders or equity holders. This is the main difference between private company and a partnership. This is a common characteristic of all limited liabilities companies.

4.   Restricted transfer of Shares

Another important characteristic of private company is restricted transfer of shares.Private company’s shares are not traded in stock market. Thus shares of private company are not available to general public for sales and purchases.

5.   Limited Disclosure Requirements

Private company has limited disclosure requirement as compared to public company. Private company information like annual account, change of office notice, etc needs not to be disclosed to general public. This disclosure is normally made through advertisement in newspaper.

6.   Less Regulated

Private company is less regulated as compared to public company. In private company, there is no money invested by general public, therefore private company is not strictly regulated. While public company is strictly regulated due to general public investment.

List of Important characteristics of private company

1.   It has limited number of owners.

2.   It has limited liability.

3.   Its shares are not traded in stock exchange.

4.   It has limited disclosure requirements.

5.   It is subject to fewer regulations.