Going public refers to a private company’s initial public offering (IPO), thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital in hopes of expanding; venture capitalists may use IPOs as an exit strategy – that is, a way of getting out of their investment in a company.

The IPO process begins with contacting an investment bank and making certain decisions, such as the number and price of the shares that will be issued. Investment banks take on the task of underwriting, or becoming owners of the shares and assuming legal responsibility for them. The goal of the underwriter is to sell the shares to the public for more than what was paid to the original owners of the company. 

One of the advantages of going public is that public companies often trade at one to ten times the value of a private company of the same relative size and type. Because the public company has better and more accessible alternatives for raising capital, it provides greater leverage in its negotiations with both individual and institutional investors. Public companies offer a quick “exit strategy” to its investors as the stock can be readily sold in the public market. Investors find the liquidity factor of a public company reassuring.

Disadvantages – Puts pressure on short-term growth, increases costs, imposes more restrictions on management and on trading, forces disclosure to the public, and makes former business owners lose control of decision making.

For some entrepreneurs, taking a company public is the ultimate dream and mark of success (usually because there is a large payout). However, before an IPO can even be discussed, a company must meet requirements laid out by the underwriters. Here are some characteristics that may qualify a company for an IPO:

So thinking to form a Publicly Traded corporation, or take your LLC public, we can help you take your corporation public.