Smaller, privately held companies often watch their cash flows closely as they balance outstanding receivables and payables. The extra cash is needed to fund growth and new product innovations, among other things. This, along with the fact that smaller private businesses have historically had problems accessing new capital, enhances opportunities for private investment in these companies.

For the purposes of this article, a privately held business (PHB) will be defined as one whose shares are not publicly traded. PHBs may be owned by a founding entrepreneur, his or her family members and/or a few investing partners. Although, they are almost always closely held.

Such companies may take any number of legal forms, including a sole proprietorship, a limited liability partnership (LLP) or corporation (LLC) or an S-corporation. The decision-making power usually rests with the individual or small group holding the majority of equity in the firm.

Investing in Privately Held Companies: A Guide
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