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Source: http://en.wikipedia.org/wiki/Public_company

Advantages

It is able to raise funds and capital through the sale of its securities. This is the reason why public corporations are so important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises.

In addition to being able to easily raise capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers, and employees.

A private company also has several advantages. It has no requirement to publicly disclose much, if any financial information; such information could be useful to competitors. For example, Form 10-K is an annual report required by the SEC each year that is a comprehensive summary of a company's performance. Private companies do not file form 10-Ks. It is less pressured to "make the numbers"-to meet quarterly projections for sales and profits, and thus in theory able to make decisions that are best in the long-run. It spends less for certified public Accountants and other bureaucratic paperwork required of public companies by government regulations. For example, the Sarbanes-Oxley Act in the United States does not apply to private companies. The wealth and income of the owners remains relatively unknown by the public.

Advantages continued:

  • shareholders enjoy limited liability
  • additional capital can be raised by issuing more shares or debentures
  • it enjoys greater borrowing power
  • board of directors with expertise/experience can be appointed to take decisions and delegates responsibilities
  • shareholders can sell/transfer their shares freely
[edit] DisadvantagesWhile private companies may also issue their securities as compensation for services, the recipients of those securities often have difficulty selling them on the open market. Securities from a public company typically have an established fair market value at any given time as determined by the price the security is sold for on the stock exchange where the security is traded. The financial media and city analysts will be able to access additional information about the business.

Disadvantages continued:

  • loss of overall ownership and control of the business (the personal touch may be lost)
  • decisions, due to bureaucracy, take longer and there may be disagreements
  • significant expenses are incurred when setting up a company (legal, accountants, taxes, consultants, etc.)
  • more statutory regulations to conform to
  • more people to share profits with (less income)
  • financial affairs must be disclosed publicly (this information could be used to competitors advantage)
  • published accounts must to be prepared (time consuming and costly)
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