What exactly is the differance between a public company and a private one?
What can I do to make sure nobody controls my company by bing some of it?
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> What exactly is the differance between a public company and a private one?
Public company is the one whose stocks are publicly traded, and private companies are not.
> What can I do to make sure nobody controls my company by bing some of it?
Don’t sell your stocks.
Roughly speaking, all companies are born private, and if the owners want, they can go public (through a complicated process). You know how you can go to a restaurant to buy food, go to a butcher to buy meat, go to a fishmonger to buy fish? Well you can go to a stock market to buy other people companies. They can only sell stocks of your companies if you go to them and tell them, “Hey, can you help me sell some of my stocks.” That is called going public.
Public company is one where shares (part ownership) of the company are traded in public stock exchanges. Anyone can purchase and sell shares of a public company.
A private company is one where ownership of the company is privately held and the shares of said company cannot be traded in public exchanges. They can be bought and sold through private contracts.
To maintain absolute control of a company, don’t make it public and don’t sell shares of it privately to anyone else. Also don’t default on personal debts as ownership of a company is considered an asset and can be seized in cases of bankruptcy or if a successful civil lawsuit is brought against the owner.
Companies are public when they “go public” by listing on a sharemarket. Before then they are private, they can sell parts of themselves, but are limited in how they can do so.
The important bit is that being public complicates your corporate governance. You need to have certain reporting in place, a board to represent stakeholders, etc. Basically you need to ensure you’re treating your shareholders “fairly”.
Some of those requirements also come into play if a certain number of people invest in your company (essentially you get regulated like a public company because you’re starting to look like one, instead of a private company owned by a few investors).
Companies go public because they want to raise a bunch of capital, the existing owners want to get money for their stake (and can’t sell it to one investor because it’s too much money for them to put down on it), etc.
A public company offers partial ownership stocks to anyone who wants to buy them. A private company is owned by only a single person or a small number of people, and strangers do not have the opportunity to purchase shares in the company. Because public companies allow strangers to buy shares, there are laws governing what sort of information those companies have to make public, so that investors can make informed decisions. Private companies don’t have to provide much public information about how they are run.
When you make your company public, you offer a certain percentage of ownership of the company to the public, in the form of shares of stock. In order to make sure you continue to control the company, you have to make sure that you control a large enough chunk of the stock so that no one else can get a large chunk and take over. The easiest way to do that is to keep 50.1% of the stock for yourself, and sell the other 49.9%. That way, even if one person buys all the public stock, you still have more than them. However, by keeping 50.1% of your stock, you are missing out on money you could make from selling all those shares. If you are willing to take a risk, you could keep only 20% of the stock for yourself, and hope that no one else has the ability to purchase a chunk that large.
Companies also have other options like creating different types of stock, one kind with voting power, and another kind with less or no voting power. That way, even if someone manages to buy up a huge chunk of your stock, they still wouldn’t have any voting power.
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