Taking a company public with an IPO

Many Maryland entrepreneurs hope to grow their businesses to the point where going public becomes a realistic option. Becoming a publicly traded company has many advantages, but putting together an initial public offering can be both prohibitively expensive and very time consuming. Figures provided by the U.S. Small Business Administration reveal that relatively few companies are able to launch a successful IPO. Entrepreneurs should also understand that public companies are not able to operate with the same degree of flexibility as private enterprises.

An IPO requires careful business planning and in most cases the services of an investment bank. Finding a suitable banking partner is crucial, and entrepreneurs should seek out an investment firm that has previously worked on IPOs for similar sized businesses. Investors must also be given a good reason to buy shares, and annual growth rates of less than 20 percent are unlikely to draw much interest. More information about the process can be obtained from the U.S. Securities and Exchange Commission.

Businesses that can clear these hurdles may reap significant rewards by going public. The initial sale of shares often provides the capital necessary to realize expansion plans, and being publicly traded can also make it easier to secure financing in the future by issuing additional shares. A business may also be able to attract a higher caliber of employee when benefits such as stock options can be included in recruitment packages.

The cost of an IPO can sometimes reach seven figures, which makes effective due diligence efforts a very important first step. An experienced business law attorney can assist clients who are interested in this process by scrutinizing the credentials and experience of investment banking firms and outlining the legal and financial reporting obligations that come with becoming a publicly traded company.

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