Going public refers to when a company undertakes its initial public offering (IPO). This means a company sells shares of its stock to the public for the first time.
Most companies do this to raise additional capital. After its IPO, the company will be subject to public reporting requirements. Because this reporting can be labor-intensive and expensive, companies carefully consider the benefits and burdens before undertaking an IPO.
To conduct a registered initial public offering, the Securities Act requires a company to file a registration statement with the Securities and Exchange Commission (SEC). The SEC then has to approve the registration statement before any securities can be sold.
When most people think of “going public,” they aren’t aware of the need to file a registration statement with the SEC. Instead, the going public business definition is what comes to mind. But the registration statement is the first step. Once it’s approved, the business process begins with contacting an investment bank and deciding on the number and price of shares to be issued.
Investment banks underwrite the new shares. In other words, they essentially buy the shares from the company with the goal of selling the shares to the public for more than what the bank paid for them.
Going public may sound like a sweet deal, and now you may be motivated to list your home-based business on the New York Stock Exchange. Not so fast! The going public definition contains some unspoken requirements about fitness for the public markets.
Before attempting to go public, a company should have:
If your company meets all these characteristics, then it may be good to consider whether going public benefits would make an IPO worthwhile for your company. Some lucky business owners have found that going public has made their small business a household name around the world.
Going public can have many advantages for a company. It can diversify ownership, strengthen your capital base, make corporate acquisitions easier, and even enhance your company’s prestige.
Unfortunately, going public is expensive. It can increase long-term costs, and it imposes restrictions on management. Being a public company forces disclosure to the public and places restrictions on trading. It also takes decision-making control away from former business owners and turns decisions over to corporate boards and management.
When you’re preparing to set up your company, we can help. Our Corporate Formation Services can help you get your corporation set up in virtually all 50 states. We make it easy for you to create a corporation and reach investors fast. And our complete suite of business services, from Worry-Free Compliance Service to our ZenBusiness Money App, can help your company at each stage of growth. Keeping your documents and business compliance all in one place is essential if you want to take your company public!
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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