In public companies, the required structure of a Board of Directors now requires a majority of independent members. Compensation and audit committees must be fully independent. These are appropriate structures for public companies, but completely unnecessary in many private companies. In private companies, the Board of Directors is frequently and appropriately dominated by management. The owners are the managers and the managers are the directors.
Auditors also are required to complete tests in public companies that are not required in private ones. Even though as a private company it is wise to get an independent audit, the standards, frankly, are appropriately more bearable in a private company. Many of the public company standards are intended to protect minority shareholders. In a private company, many of the minority shareholders are employees, friends and family and, while they need protection, they have a natural ability to protect themselves by virtue of their roles and relationships. In a closely held or family business, some of the audit's traditional benefits are completely irrelevant.
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