While your business may have been established as an LLC or a sole proprietorship, maintaining high levels of success could inspire you to take the company public. Attorney Julian Cordero of Cordero Law has aided many businesses through this process, and he has learned how to best prepare before making the transition. Helping companies convert from privately owned to publicly traded has given him insights into best practices for successfully making the change.
When your company becomes hugely successful and begins dominating its market, it may be time to consider going public. Cordero helps his clients evaluate the decision by first looking through their records. “Business infrastructure and financial records are imperative to have perfectly in order before a company gets to the stage where it can even consider going public. If my clients don’t have a sound business and financial structure in place, we know that they are not going to be able to attract the right investors to handle this process. While working on other ‘stuff’ can be appealing, if you can’t show that your foundation is in order, no one will want to build a house on it.”
Through his work with business owners, Cordero has learned that a common weakness is a lack of understanding about the legal ramifications of taking a company public. “Before going public, many business owners probably barely know anything about the Securities and Exchange Commission. Registering with the Securities and Exchange Commission is a significant undertaking that businesses need to be aware of. In fact, the main issue of liability for public companies, including their officers, directors and employees, are the securities laws that need to be followed. Depending on the provisions of the regulations of these laws, if they are not followed properly, the Securities and Exchange Commission may bring criminal or civil penalties against the company, its directors and officers.” Cordero works closely with his clients to make them aware of protocols and procedures that need to be followed by a public company in order to remain in compliance with SEC regulations.
Becoming a publicly traded company may seem ideal, but Cordero advises his clients to consider all angles before beginning the process. “To be successful in this process, you must outperform your competitors. Investors base a majority part of their initial public offering investment decisions on the financial factors of the company. It is also important to have a compelling story that can set you apart from your competitors.”
Reaching the level of success that allows you to consider taking your company public is exciting, but not taking the time to fully consider the decision could lead to trouble later on. Hiring a good, experienced lawyer to take you through the process will increase your chances of success.
This article was written by Alaina Brandenburger for Small Business Pulse