In the modern world, all companies can be placed into two categories: private and public. When companies are first created, they are private, and later on if they remain successful, that company can go through an IPO, or Initial Public Offering, to sell its shares to the world on any stock exchange, thus rendering it a “public company.” In simple terms, an IPO is when the owner of the company decides to raise capital by selling shares of their company to the public. In other words, an IPO is the first time a company introduces and sells its shares publicly. 

When a company becomes public, its ownership gets spread out as company shares are bought out. The original owner of the company usually remains the biggest shareholder, but now he or she isn’t the owner – they’re just like everyone else! In essence they sold their ownership to the public, and because of this, the company has to now be more open with its funds, assets, liabilities, etc. which are released through quarterly and annual reports. This is done on purpose so that the general public gets the opportunity to see how the company is doing, and on what basis should they or should they not invest in them. Examples of public companies include Apple, Microsoft, and Tesla. These are companies that you can personally invest in, as well as see their financial status, as if you were a company insider!

Now, a private company is a bit different. For starters, unlike public companies, privately-held ones usually have one or two main owners, and very few investors; further, these investors aren’t regular people – they may be close friends with the owner, or they are initial investors that put in a lot of money in the beginning to help start up the company, and in exchange they received partial ownership either currently or if and when the company goes public. These guys are known as angel investors, or venture capitalists, depending on if they are using their company’s money (the latter), or their own money (the former). In-N-Out Burger is an example of a private company, with its owners being the Snyder family collectively since its original opening in 1948.

As a whole, public companies tend to bring in more money for not only the shareholders (obviously), but also the original owner[s], since there is not only less risk involved, but also it is much easier to raise funds for the company. However, many companies do stop at the private sector and stay there, for once a company goes public, there is a general lack of privacy over the status of the company, which was formerly kept hidden. A business’s financial status is a lot like one’s salary, so releasing it to the public could definitely be a hard pill to swallow. Lastly, public companies tend to be run in the best interests of the investors, which is the general public, meaning that original owners aren’t necessarily reaping similar benefits as when they were private.