|
|
Planning to Go Public As An Exit Strategy
People start businesses for a host of reasons. Some are valid and some are more whimsical. One goal often cited is to take the business public and make big money. To do this, you business needs to be set up correctly.
First things first. A business entity is the structure of the company. It can be a shell entity such as a corporation and limited liability company or something more direct such as a partnership. If you want to go public one day, only one choice will work.
Of these business entities, the two most popular are clearly limited liability companies and corporations. There are a number of reasons for this, but a primary one has to do with the fact they shield their owners from personal liability for company debts.
Many people think the LLC has been around for a long time. It has not. The first one was formed in the late 1970s in Wyoming. The state passed law giving rise to it to boost tax revenues and help out small businesses.
So, did all the states immediately jump on board? Nope. Nothing much happened for 10 years or so. Then the IRS issued a ruling that said the LLC could be taxed like a partnership instead of a corporation. The world of business entities would never be the same.
This minor tax change resulted in the LLC madness we see today. States rushed to pass legislation allowing for them and people begin to take notice of that funny LLC designation after business names.
This mad rush eventually resulted in some problems. People began to realize the LLC was not all it was cracked up to be. State fees could be high. One of the biggest was discovered when people tried to take their limited liability companies public.
The primary problem with taking an LLC public has to do with how ownership is held. The owners have a percentage interest in the company. To go public, a business must have shares of ownership that can be traded. The LLC has none.
As you have probably noticed, all large publicly traded companies have shares. The prices of these shares are discussed ad nauseum in the media. These shares are a necessity if a company is to be owned by the public.
If you want to take your company public one day, you must choose a corporation as the business entity. Any other choice is going to be problematic.
|
 |
Please Rate: |
|
Rating: |
 Processing ... |
(Average: Not rated) |
| Views: | 15 | |
|
| More Articles from Law | | |
| Top Articles in Law | | |
|
