Going From Private To Public: How Trading Openly Changes The Laws For Your Company

If you rent a house or an apartment, it's very beneficial to know the laws that protect tenants. Hi, my name is Sally Riddell and when I moved into my first apartment, I wanted to make sure that I knew all of the laws concerning the rights of tenants. I researched tenant laws and I also spoke with a family friend who is a lawyer to make sure that I understood my responsibilities and rights as a tenant. Because I knew this information before I started renting my apartment, I felt confident when signing my rental agreement. If you're considering living in a rental home or apartment, I suggest that you read my blog first. If you are already renting, this blog will also help you if you ever have any concerns.

Going From Private To Public: How Trading Openly Changes The Laws For Your Company

15 October 2015
 Categories: Law, Blog

Once your company is ready to switch from a privately funded venture to a publicly funded one, you will need a corporate lawyer to help you establish this status. There a number of things that change legally for your company, and trying to navigate them on your own is legally dangerous. Giving those responsibilities and duties over to your corporate attorney alleviates the concern that you could accidentally kill off what you have built. Here are just a few examples of how switching from a private company to a publicly traded one changes the laws for your company.

Several Owners Means Public Openness

Instead of your company being owned by just a few people, the stock in your company is now owned by several people. Even if the majority of the shares are still owned by the original people involved with your company, everything about the business is open to public viewing with the exception of company trade secrets. That means that everyone that has ownership of company stock, from you all the way down to the people that own a single share, are entitled to know what is going on with the business and everyone can attend annual shareholder's meetings to hear what changes will be implemented, the previous quarter's and year's profits, etc.

Not having or allowing shareholder's meetings or withholding information to company owners and investors puts you in legal jeopardy. If you make a mistake as a publicly traded company, you have to own it and fix it. Your corporate lawyer can best advise you on how to smooth things over with shareholders and investors.

The Type of Company Changes

You may have been an LLC (limited liability company) or unincorporated company before the change. For tax purposes, you may now be an incorporated company because you have shares of stock available on the stock market and/or you have securities for sale to investors with deep pockets. You also cannot offer any shares at any particular market value, since you cannot file taxes properly for the shares that are bought and sold. To make the switch in the type of company, your corporate law attorney will have to file a lot of paperwork before you are able to produce several shares of stock for the public. If your attorney does not see this paperwork is file it, you cannot claim a different tax status nor can you begin to call your company a publicly traded one.