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From Wikipedia, the free encyclopedia

A privately-owned enterprise refers to a business that is owned by private investors, shareholders or owners (usually jointly, but they can be owned by a single individual), and is in contrast to state institutions, such as publicly-owned enterprises and government agencies. Private enterprises comprise the private sector of an economy. An economic system that contains a large private sector where privately-run businesses are the backbone of the economy is referred to as capitalism. This contrasts with socialism, where industry is owned by the state or by all of the community in common. The act of taking assets into the private sector is referred to as privatization. The goal of private enterprise differs from other institutions, the major difference being private businesses exist solely to generate profit for the owners or shareholders.[1]

A privately owned enterprise is one form that private property may take.


Types of Privately-Owned Business

  • Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has total and unlimited personal liability of the debts incurred by the business. This form is usually relegated to small businesses.
  • Partnership: A partnership is a form of business in which two or more people operate for the common goal of making profit. Each partner has total and unlimited personal liability of the debts incurred by the partnership. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships.
  • Corporation: A business corporation is a for-profit, limited liability entity that has a separate legal personality from its members. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff. Corporate models have also been applied to the state sector in the form of Government-owned corporations. A corporation may be privately held (that is, close - that is, held by a few people) or publicly traded.

Privately-owned businesses are typically divided into two subcategories: privately-held companies and publicly-traded companies. Publicly-traded firms list their shares on the stock market, allowing for more diversified ownership as anyone who purchases their stock becomes a partial owner and is able to receive a portion of its profit. Despite the term "public" in its name, a publicly-listed company does not entail public ownership because it is not owned by the whole society. It just means that shares of the company are for sale to anyone in the general public who wishes to purchase them. Publicly-listed corporations may be partially owned by governments.


Criticism of private business has come from many perspectives, most notably socialist perspectives. Criticism of private property and privately-owned business is usually accompanied by criticism of the capitalist system entirely. Socialists often argue that within a capitalist system, economic activity is uncoordinated and serves the interest of a small business class as opposed to society as a whole. This results in stifled advancement and an 'anarchy of production'. Marxists criticize private business, along with capitalism, as being a form of exploitation that serves to extract the surplus value from the workforce and distribute it to passive owners (the capitalist class) in the form of profit. Because of this exploitation, the workers do not receive the full product of their labor and are forced, by the conditions imposed upon them by capitalism, to sell their labor to business owners in order to make a living.[2] Socialists typically argue for public ownership of the means of production, with Marxian socialists advocating more direct collective worker-ownership of business enterprises with democratic worker management. Other critics of private property include technocrats, some forms of economic nationalism, anarchists and proponents of economic democracy, who believe power and economic decision-making should be spread among as many people as opposed to being concentrated into the hands of a few.

See also




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