Sophia Tutorial Accounting Businesses and Organizations,

1. Publicly Traded Companies vs. Privately Owned Companies The main differentiator between publicly traded companies and privately owned companies is that publicly traded companies have their stock listed on an open market, while privately owned companies do not. Publicly traded companies are under more scrutiny, because they have to provide reporting information at certain intervals. There are also more regulatory requirements for publicly traded companies. Privately owned companies, on the other hand, are more nimble. They don't have the same regulatory oversight as publicly traded companies.  EXAMPLE For example, if publicly traded companies want to make a big decision, they must have shareholder approval, which can be a difficult and long process. Privately owned companies, because they are more nimble, can focus more on growth and expanding the business, without being mired in the shareholder approval process. Publicly traded companies can sell more shares, so it is easier for them to gain access to new capital as they need it. This is more difficult for privately owned companies, because they have to go out and try to raise the capital from different investors. Publicly Traded Companies Privately Owned Companies © 2019 SOPHIA Learning, LLC. SOPHIA is a registered trademark of SOPHIA Learning, LLC. Page 1 Stock listed on an open market More scrutiny; need shareholder approvals Sell more shares Stock NOT listed on an open market More nimble; can focus on growth Difficult to raise capital 2. Legal Entities There are several different legal entities involved in accounting. A sole proprietorship is a type of company that is owned by a single individual, where the individual and the business are legally treated as the same. In contrast, a limited liability company company, or an LLC LLC, is a type of company where owners are not held personally responsible for the organization's liabilities. A limited liability partnership partnership, or an LLP LLP, is a type of company where only one of the partners is liable for the