Private Sector – Definition

Cite this article as:"Private Sector – Definition," in The Business Professor, updated October 15, 2019, last accessed October 19, 2020,


Private Sector Definition

The private sector is the aspect of the economy that’s handled by individuals, as well as, companies for the sake of profit and it isn’t controlled by the state. Thus, it covers all for-profit businesses which aren’t government-owned or managed. Companies and corporations which are run by the government belong to the public sector, while charities and other non-profit organizations belong to the voluntary sector.

A Little More on What is the Private Sector

The private sector is the part of a national economy which is owned, managed, and controlled by either private individuals or enterprises. Because the government has little or no involvement, it is sometimes referred to as the citizen sector. The private sector’s goal involves making money and they employ more workers than the public sector. By creating a new enterprise or privatizing a public sector organization, a private sector organization is formed. A large private-sector corporation can be traded either publicly or privately. Businesses in the private sector reduce the price of goods and services in the competition for consumers’ money: theoretically, customers don’t want to pay a higher price for an item when that same item can be purchased somewhere else at a lower price.

In the majority of free economies, the private sector comprises a major part of the economy, as against other nations that have more state control over their economies having a larger public sector. For instance, the United States has a private sector that’s very strong thanks to the free economy, while China, whose state controls most of its corporations, has a larger public sector.

Types of Private Sector Businesses

The private sector is highly diverse and forms a major part of various economies. It’s based on various individuals, groups, and partnerships. The entities which make up the private sector include:

·         Partnerships

·         Trade unions

·         Large corporations and multinationals

·         Professional and trade associations

·         Sole proprietorships

·         Small and mid-sized businesses

Despite the fact that the state might have control over the private sector, the government regulates it legally. It’s obligatory that any business or corporate entity functioning in that country operates under the laws.

Private and Public Sector Differences

The private sector employs workers via corporations, individual business owners, or other non-government agencies. Jobs include those in law firms, aviation, financial services, hospitality, newspapers, or other non-government positions. Workers are paid with part of the profits made by the company. Private sector workers are likely to get more increased payments, greater promotion chances, more career options, less job security, and also reduced comprehensive benefit plans than public sector workers. Working in a more competitive marketplace usually involves working longer hours in a more tasking setting as against working for the government.

The public sector employs workers via the local, state, or federal government. Usually, civil service jobs are in teaching, armed forces, city council, healthcare, and emergency services.

Workers are paid via a part of the government’s tax dollars. Public sector workers are likely to have encompassing benefit plans, as well as, better job security than workers in the private sector; once a period of probation expires, many government positions end up being permanent appointments. Transfers among positions in the public sector while having the same benefits, sick pay, and holiday benefits are relatively easy while getting pay increases, as well as, promotions is a herculean task. Working with a public agency offers a more comfortable work environment devoid of market pressures, as against working in the private sector.

Private and Public Sector Partnerships

The private, as well as, public sectors work together at times while promoting shared interests. Private sector businesses leverage governmental assets, as well as, resources while financing, developing, owning, and also operating public services or facilities. For instance, a private company may make a one-time fee payment to a state in order to operate a certain freeway length for a specific time in exchange for revenue from tolls.

References for “Private Sector › Insights › Markets & Economy

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