Taking a company public is a big decision that is often necessitated by the need to raise capital. A company can acquire the money it needs to develop and grow by selling a stake in itself to shareholders. This allows the owners to keep some control of the entity while at the same time generating cash by selling company stock on the public markets.
Prior to going public, the company must be legally structured as a corporation so the owners should incorporate the business. It is recommended that they consult an attorney who specializes in this area. The attorney will discuss the benefits and drawbacks of the process and will draft the required legal documents. Incorporation laws vary by state, so business owners should consult with an attorney who works within their home state.
After the company has incorporated, it should engage in a comprehensive public relations campaign. Highlighting the best aspects of the company to the public and other businesses is crucial because these folks are prospective shareholders. The goal is to make sure that everyone knows who the company is before it goes public.
It is recommended that some professionals be retained to prepare for the initial public offering of stock. An auditor should be hired to review the financial records and make sure that there are no discrepancies or questionable items. A securities and corporate law attorney will help the company navigate through the relevant regulations and processes that need to be followed. Failure to remain in compliance with the law can result in large financial penalties for the company.
The securities lawyer will help the company file a Securities and Exchange Commission registration statement. Once the paperwork is in order and the SEC declares it effective, the company is permitted to make its initial public offering of stock on the market. This process is exciting but also scary and it requires professional guidance each step of the way.