4.1.1 The privately held company

As a privately held company (whether founder-owned, family-owned, or a partnership), the company can buy and sell real property in its name, as well as goods, equipment, and intangibles. It owns all the assets (tools, inventory, goods, accounts receivable or payable, etc.) and is responsible for any debt. The owners of the company can engage in all the following activities. They can:

• Buy and own real estate and equipment.

• Lawfully use their real estate and equipment in any way they want.

• Sell, transact, exchange, and offer all the goods or services that they produce.

• Sell the company or any of its assets, or transform the structure of the company into something else, such as an LLC or a B Corp.

• Take out loans, pay off loans, increase or reduce their debt.

• Pay themselves salaries.

• Hire and pay employees (at or above minimum wage).

• Pay taxes on their profits.

• Reinvest some of their profits into the enterprise.

• Distribute moneys to the owners as distributed corporate profits.

Essentially, the owners of a privately held company can do everything except raise equity on a public stock exchange, for which they would need to do an initial public offering (IPO) and become a publicly held company (with the minor exception of Regulation D, which allows privately held companies to sell a small, limited number of equity shares without registering with the SEC).

In a privately held company, as a result, the equity that the owners have in the company is not very liquid. In order to take their money out, the owners need to sell assets or distribute profits, pay themselves higher salaries, dissolve the company, or sell their equity in the company to someone else. This makes it slightly difficult for a company to raise major capital inflows.