Definition
A private corporation is a corporation organized by private individuals and owned by private persons, as distinguished from a corporation created by or on behalf of the government or the public at large. Ownership of the enterprise — its stock, membership interests, or capital — rests with private parties rather than the state or a governmental unit.
The term carries two related but distinct senses in legal research:
1. Privately owned corporation (ownership sense): Any corporation whose equity is held by private individuals or entities rather than a government body. Under this meaning, a private corporation includes an enormous range of entities — banks, insurers, manufacturers, hospitals, colleges, railroads, and closely held family businesses — united by the fact that no governmental body holds or controls ownership.
2. Privately held corporation (market sense): In modern usage, private corporation is sometimes used specifically to mean a corporation whose shares are not publicly traded on a stock exchange, as opposed to a public corporation whose shares are available to the general investing public. This narrower sense is common in transactional and securities contexts.
The first meaning is the older, foundational one embedded in constitutional and corporate law doctrine. The second is a later commercial refinement that modern practitioners encounter frequently. Context determines which sense is operative.
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Common Confusion
Private corporation is easily conflated with two other terms, each pointing in a different direction.
Private corporation vs. public corporation: The foundational distinction is governmental vs. private ownership and purpose. A public corporation is created by the state to serve a public function — a municipality, a public university, or a government-owned utility. A private corporation serves private ends, even when its activities benefit the public (as with a private hospital or a private railroad). The confusion is compounded because some entities that look "public" in common speech — a large bank, a publicly traded company — are private corporations in the legal sense.
Private corporation vs. publicly traded corporation: Modern financial usage inverts the word "public." A corporation with shares traded on a public exchange is called a "public company," yet it remains a private corporation in the constitutional and organizational law sense. A researcher moving between nineteenth-century treatises and modern securities filings must track which frame of reference is operative.
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Why It Matters in Research
The distinction between private and public corporation is not merely taxonomic — it carries constitutional and legal consequences that shaped an enormous body of nineteenth-century American case law and continue to matter today.
The foundational moment is Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819), the case cited indirectly by Rapalje & Lawrence's reference to 4 Wheat. 659. The Supreme Court held that a private corporation's charter is a contract protected by the Contracts Clause of the Constitution, placing it beyond unilateral legislative impairment. The classification of an institution as private rather than public was therefore not a background matter — it determined whether the state could alter or revoke a corporate charter. Researchers examining pre-twentieth-century corporation law will encounter the private/public distinction as a live legal battleground, not a settled taxonomy.
Historical sources use the term private corporation to include entities that modern readers would not naturally associate with private enterprise: turnpike companies, toll bridge operators, canal companies, charitable hospitals, and private colleges. These were private corporations in the legal sense even when they performed quasi-public functions. Researchers working with transportation and infrastructure law from the antebellum era should be alert to this.
The modern market-sense usage — private corporation as a synonym for closely held or non-publicly-traded entity — generates its own research traps. Statutes governing close corporations, S corporations, and benefit corporations use specialized vocabulary that may or may not overlap with the term "private corporation" as used in the relevant jurisdiction's case law or older treatises. The terms are not interchangeable without checking context.
For tax research, the term connects to private foundation rules under the Internal Revenue Code, where "private" carries its own specialized regulatory meaning distinct from either the constitutional or securities-law senses.
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Historical Dictionary Support
The three historical dictionaries converge on the core definition with unusual consistency. All three anchor the concept in private ownership of capital or stock, and all three use the same illustrative categories — hospitals, colleges, banks, insurance companies, and transportation companies — drawn from Kent's Commentaries (2 Kent's Com. 275), which appears to be the common authority. Burrill and Rapalje & Lawrence are essentially paraphrasing the same doctrinal source.
Rapalje & Lawrence adds the most research value by flagging the specific cases that worked out the distinction from public corporation, including the Dartmouth College line of authority. The reference to 8 Wheat. (U.S.) 480 points to Society for the Propagation of the Gospel v. Town of Pawlet (1823), another landmark in the private/public corporation taxonomy.
What the historical dictionaries do not address is the modern securities-law inversion of the word "public," which postdates them entirely. A researcher relying solely on Black's or Burrill will have the foundational constitutional meaning well in hand but will need to supplement with modern sources to navigate the transactional and regulatory contexts where "private corporation" means non-publicly-traded.
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Jurisdictional Note
The constitutional protection of private corporate charters under the Contracts Clause is a federal constitutional doctrine with national application, but state corporation statutes vary significantly in how they define and treat private corporations, closely held corporations, and non-publicly-traded entities as regulatory categories. Some states have distinct statutory regimes for close corporations; others fold these entities into the general corporation statute. Researchers should not assume that a state court's use of "private corporation" maps cleanly onto any single modern statutory category.
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Encyclopedia Cross-Reference
business_43: Corporate Formation — Corporate Types (Close, Professional, Benefit Corporations) (The Law Mind Business Organizations & Corporate Law Encyclopedia)
business_44: Corporate Formation — S Corporations (Tax Election and Requirements) (The Law Mind Business Organizations & Corporate Law Encyclopedia)
tax_159: Private Foundations (The Law Mind Tax Encyclopedia)
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