Why would a company want to go public?

When you are looking to gain additional capital for a small business, going public and being publicly traded may be what you want to do.

If the companies stock is sold in a primary offering, that is one that the stock is sold of the account of the company, then new capital is raised without the associated risks, restrictions and cost of debt or constraints.

Depending on the stage your company is at, it whether you should decide to go public or obtain loans from financial institutions or the SBA.

The funds you obtain through public trade can go for whatever the companies needs are. However, they purchases will need to be disclosed in the prospectus.

Even though the company's use of the proceeds of the offering must be explained to potential purchasers of the stock in the prospectus given to them by the underwriters, the funds can then be used for proper purposes, which have been disclosed.

There are advantages and disadvantages in a company going public. Here is a list of each the advantages and disadvantages.

Advantages

1. Marketable Holdings - Once a company goes public and a market is established for its shares, the shareholders can figure out the market value of the shares.
2. Acquisitions - Publicly traded stock will serve as currently. This allows the publicly traded company to be able to make acquisitions by offering its own stock.
3. Prestige - Larger publicly traded companies tend to show more prestige. The information about the company is more publicly known and visible. Many investors prefer to see what a company is about.
4. Compensation vehicle - Stock based plans for a publicly traded company is a great way to show strategy for attracting and developing employees and managers.
5. Improved financial conditions- In selling the equity securities you will increase the company's net worth.

Disadvantages

1. Shareholder value will be scrutinized versus your competitors
2. The effects on the company's stock price will be a factor in management decisions
3. The stock price for some industries also reacts to key performance indicators of not only your company but of suppliers and competitors
4. You will be conducting business in the view of every on looker.

Being publicly traded with its advantages and disadvantages is a necessary way of conducting business. Knowing exactly what it means to be a publicly traded company can help know why a company would go public.

There are two different meanings for this term.

The first is a company that is owned by stockholders. These are members of the general public and trade stocks publicly.

The second is the government own corporation. This meaning of the public company is in sense of the traditional public ownership of assets and interests as a entirety.

The shares of a public company are traded openly on the stock exchange. The size of a public company is called market capitalization. A term which is often shortened to market cap. This is calculated as the number of shares that are outstanding. This is opposed to authorized but not necessarily issued.

As a publicly traded company there are a few obligations that you will need to keep in mind. It will be important to keep your shareholders informed about the company's business. The financial conditions and managements in addition to incurring additional costs and legal obligations.

There is also liability if you do not make sure the legal forms are not filled out on time and correctly. There will be some inflexibility in the managing in of the company affairs. This is particularly where the shareholders will need to approve your actions. Finally your public offering will take time and money to accomplish.

However with the benefits available, if your company is ready, going public can help bring your company to the next level of business.

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