When setting up a business, one of the most important issues to address, right from the beginning, is the form of the business. The legal entity a business takes will affect every decision it makes until its end. Money and taxes are vital topics for a business, and it is its entity that shapes the discussion. One of such entities that will be discussed in this article is that of a public company. Not all companies are public companies, and like other entities, having a public company comes with its advantages and disadvantages.
A public company is not owned privately, but rather one that has issued securities and sold all or some of its shares through what is called an initial public offering (IPO). An important point about a public company is that through trading in the stock exchange, it is the public (through market forces) that determines the value of the company based on its performance. Capital can be raised, and revenue generated through such offerings, even after the IPO. New shares can be offered to the market in further offerings.
However, some disadvantages may hinder owners and founders of a company from going public. Unique among other entities, a public company is inherently up to more scrutiny given that they must file reports with the Securities and Exchange Commission (SEC). Given that stock is traded publicly, these reports are then made available to both shareholders and investors. Furthermore, those who have bought shares (shareholders) can request financial documents from the company – a private company does not have to reveal such information.
However, it must be stated that one entity is not superior to another. It is entirely up to the company to decide the best form of business for their needs. Many of the biggest companies are private, and many are public. Therefore, owners should research carefully and follow the route that creates the most benefits for their business.