Going public requires a lot of work for a company, and being prepared is the best way to make the transition move quickly and smoothly. These tips can help you prepare your business before you begin the initial public offering process.
Assemble a Team
Assembling a team of professionals from within and outside the company is the best way to begin your business’s journey to becoming public. Accountants, management, underwriters, bankers, and consultants are a few of the experts you’ll need to help your IPO move smoothly. Accounts and consultants are important to check your books and to be sure they are in order. Management can contribute an overview that may be appealing to potential investors. While the CFO handles the majority of the work, an IPO team should also hire a controller to lead the team during their absence.
Prepare Financial Reporting
Companies that go public are required to release annual and quarterly financial reports to potential shareholders. All your books should be complete and accurate to avoid any rejection from the Securities and Exchange Commission. Having a skilled accountant on your team may make this process easier for your business. The SEC will comb through your records with scrutiny to be sure all investors are given the truth. Finding and using a high-quality automated financial reporting technology is one solution that can be easily integrated into most company’s accounting policies.
Deal with Tax Concerns
Companies that go public have to deal with a variety of complex tax-related issues. An IPO doesn't cause a company to pay taxes. Instead, it occurs when shares are sold. Any gains are taxed as capital gains—either short-term or long-term. Net short-term gains are taxed at the same rate ordinary income would be while long-term gains are taxed at lower rates. Working with an IPO-experienced tax advisor can help a CFO become experienced with the charges involved with going public.
Participating in IPOs is risky for shareholders because there’s no market data for the stock for which they’re choosing to invest. This means it’s up to the business to reduce any risk it possibly can to increase the chance of selling stock. Before going public, CFOs should address high-risk gaps by completing a risk assessment—which is a review done by an accounting firm to measure the amount of risk someone may experience while investing in your company. By displaying this information, it can put investors at ease, which may increase the number of sold shares.
Get Started Early
The entire IPO process takes quite a while to complete and can vary significantly depending on market conditions, company performance, and valuation expectations, so it’s impossible to tell you exactly how long it could take. However, some companies have begun an initial public offering in as little as 10 weeks, but there are others that have taken as long as six months. Businesses that need to go public by a certain date should start early—around a year ahead if possible—to allow for plenty of time to file papers, review with the SEC, and get everything in order before ofering shares.