Step 1: Decide the type of company you want to create
Creating a company and then deciding to get it on the stock market can be a daunting process. The first and most important step is to decide the type of company you want to create. There are a few different types of companies you can create: a limited liability company (LLC), a C Corporation or an S Corporation. Each has its own advantages and disadvantages, and you should speak to an expert before making a decision on which is best for your needs.
As well as the type of corporation you choose, you also need to decide on the structure within it. Deciding on the number of owners (shareholders) and board of directors will affect the company’s operations including financial, personnel and legal decisions. As the company grows, consider if you need to add additional officers, directors or shareholders.
Step 2: Set up the business entity
Once you’ve decided on the type of company and structure, you must set up the business entity. This will involve submitting the necessary paperwork to your state and registering for an Employer Identification Number (EIN) with the IRS. Depending on the state you live in, you may also need to set up other registrations such as a health and safety compliance agent or insurance.
You will also need to draft and execute articles of incorporation, appoint officers and directors, issue shares to shareholders and talk to a lawyer and accountant regarding any additional registration requirements depending on the type of business and state you are in.
Step 3: Plan and Prepare a Prospectus
Once your entity is set up, you must plan and prepare a prospectus. This is essentially a document which provides potential investors with information on the company, including its management, financial plans and products and services. The prospectus also serves as the key marketing tool for the sale of stock options.
It is important that the prospectus is properly written, contains accurate financial reports and is compliant with all the relevant regulations. While it is possible to write a prospectus yourself, it is advisable to speak to a securities attorney or accountant to ensure that the document is legally sound.
Step 4: Hire an Investment Banker
Once the company is set up and you have a prospectus written, the next step is to find an investment banker to take your company public. An investment banker will act as a financial advisor for the company, helping to structure the offering, provide financial advice and ensure the transaction is compliant with the relevant regulations.
It is important to speak to several investment bankers before making a decision which one to use, as their advice and fees can differ greatly. In addition, they will also provide advice on pricing the offering and make sure the stock listing is attractive to potential investors.
Step 5: File With the SEC
After you have hired an investment banker and planned the listing, the next step is to file a registration statement with the Security and Exchange Commission (SEC). The registration statement is essentially a disclosure document which details the company, its business, its financial condition and risks, legal liabilities and its proposed offering.
You will also need to include financial statements (audited by an independent CPA) and other documents such as the prospectus and copies of any contracts the company has entered into. Again, it is important to speak to a securities lawyer before submitting the registration statement to the SEC.
Step 6: Wait for Approval
Once the registration statement is filed with the SEC, you must wait for approval before you can list your company on the stock market. The SEC will review the registration statement and supporting documentation, and may ask for additional information or clarify some of your disclosures if necessary. This process can take several weeks, depending on the complexity of your company.
When the registration statement is approved, the SEC will issue a prospectus which outlines the details of the offering. You must then disseminate this prospectus to potential investors and begin the process of selling your securities.
Step 7: Start Selling Stock
Once your company and its offering is approved by the SEC, you can begin the process of selling stock. Stock can be sold directly to investors or through intermediaries such as brokers or investment banks. You can also opt to list your company on a stock exchange such as the NASDAQ or the New York Stock Exchange, which will widen your potential investor base and increase your company’s profile.
It is important to set realistic expectations when it comes to selling stock. Quality companies typically take longer to get interest based investments and need to continually promote their company to keep interest.
Step 8: Consider Future Financing Opportunities
Once your company is listed on the stock market, it is important to consider the future financing opportunities available. Publicly traded companies have access to capital markets such as the bond and equity markets, as well as the ability to issue stock and enter into joint ventures. These options can be used to finance business operations, expansion plans or other investments.
In addition, as a public company you will need to meet certain requirements such as filing periodic financial reports, holding shareholder meetings and adhering to corporate governance standards. This will require an experienced management team and a financial advisor who is familiar with these rules and regulations.
Step 9: Ongoing Compliance Requirements
Once your company is listed on the stock market, you must ensure that you meet the ongoing compliance requirements. These requirements relate not only to filing periodic financial reports, but also to monitoring the compliance of your business operations with the relevant regulations. This includes complying with the Sarbanes-Oxley Act, which governs the internal control structure of companies and requires accurate, complete and timely financial reports.
It is important to ensure that you are aware of the relevant compliance requirements at all times and that you have the procedures in place to ensure that these obligations are met.
Step 10: Review/Update Business Strategy
Once your company is listed on the stock market, it is important to review and update your business strategy to ensure that the company remains competitive and attractive to investors. This may involve updating your marketing and business plans, refining your products and services, expanding into new markets and leveraging the new capital to finance growth.
It is important to create a business plan that is achievable and can be communicated clearly to investors to ensure your ongoing success.
What to Consider Before Listing on the Stock Market
Before listing on the stock market, there are a number of factors to consider. These include the type of company you want to create, the structure of the company, the costs associated with setting up a company and getting it on the stock market, and the ongoing legal and compliance requirements your business will need to meet.
Understanding these factors and planning for them adequately will help ensure a successful transition to the public markets.
What Are the Benefits of Being Publicly Traded?
Going public has a number of benefits for a business, including access to additional capital, improved liquidity and potentially larger returns for investors. It also provides the company with greater visibility, as potential customers and financial partners will be more inclined to work with a company that is publicly traded.
In addition, being publicly listed will provide the company access to the equity and debt markets and allow it to take advantage of better borrowing rates. This can provide the company with the capital it needs to grow and develop its products and services.
What Are the Downsides of Going Public?
Going public has its downsides as well, including increased scrutiny of the company’s operations and more paperwork. As a publicly traded company, you will need to submit quarterly reports to the SEC and comply with other regulatory requirements. In addition, the company will no longer be fully in the control of the founders and shareholders, and board members will need to consider the interests of all stakeholders when making decisions.
In addition, the company will become more exposed to market volatility, as its stock price may be affected by external events and investors’ sentiment. This may mean that the company would need to take additional risk management measures in order to protect its stock price.
Conclusion
Getting a company on the stock market is a complex and involved process. It requires careful planning and preparation, and a good understanding of the legal, regulatory and financial considerations involved. With the proper planning and advice, however, getting your company on the stock market can be a rewarding experience which will help your business to grow and succeed.
