Is a private company required to disclose financial information to the public?

Are the finances of private companies public?

In short, not in the United States. While many may speculate on the income of the business or research the financial statements of private companies, they will generally find this difficult. As the name suggests, a private company is not required to disclose financial information to the public. Private businesses include family businesses, sole proprietorships and the majority of small and medium enterprises.

Because private companies do not need to appeal to shareholders, there is no need or incentive to publish their financial statements. This is in contrast to public companies, which are required to make periodic financial statements available to the public.

Disclosure Requirements for U.S. Private Companies

All U.S. businesses, both private and public, are required to file financial records with the Secretary of State for the state in which they are incorporated. When a corporation is incorporated, it must file articles of incorporation or a certificate of incorporation, depending on the type of entity. This allows the company to formalize itself from the start.

After filing these documents, a company is not required to provide additional information to the public in its operations. That being said, all businesses must file quarterly tax estimates with the Internal Revenue Service (IRS) and an annual tax return, which contains all of its financial information for the year. However, these documents are not public but reserved for government use. Primarily, they are used to assess tax debts for entities incorporated in the United States.and give government the ability to monitor and be informed of broader market forces and changes in the economy.

While this offers certain advantages to private companies, for example by preventing public competitors from having a good idea of ​​the finances, distribution and strategy of private companies, large private companies will nonetheless have revenues estimated by analysts or by other reports. America’s largest private company, Cargill, is expected to generate more than $ 113 billion in revenue. Publications such as Forbes will generally maintain a list of the largest private companies that give the general public a sense of its size and operations. In essence, while private companies are not legally required to publicly disclose their financial statements, it is often not difficult to find revenue estimates for large private companies.

Disclosure requirements for private companies in the EU

These requirements differ slightly when considering European companies operating in the EU. It does not matter whether a limited liability company is public or private in the EU, it is required to publish certain financial documents.

Although member states are free to implement their own disclosure laws, all member states must adopt European Union law in the form of directives. Public documents that must be filed with the EU include constituting documents, amendments and information about authorized representatives of the company for the purpose of dealing with third parties.

Any European limited liability company–public or non-public–must publish its balance sheet, its income statement, its annual report and the opinion of the auditor. Small and medium-sized businesses that meet balance sheet and turnover thresholds must also disclose financial information.