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Public Company Structure

CHOOSING THE STRUCTURE OF YOUR PUBLIC COMPANY

The structure of your public company can have a substantial impact on your public offering.

Since what is being traded in a publicly traded company is its stock, it is important that the equity for the company be thought out carefully to avoid problems down the road. One of the problems that plagues the owners of trading companies is losing control. This happens when the controlling shareholder(s) issue an amount of stock to others, that places the owners in the minority in regards to ownership percentage. In order to avoid this problem, it is important to look at what the structure will be after all needed capital is raised and to ensure that the controlling shareholders will be able to maintain an ownership percentage sufficient to maintain control.

It is usually more difficult to increase equity after the company achieves trading status that it is before. One way of increasing equity after becoming publicly traded, is to make the regular periodic issuance of additional shares part of the owners compensation. Another way is to retain the ability of adding assets which the majority owners control so that more equity shares can be distributed to them. It is usually easier to issue enough shares to begin with to maintain sufficient equity than to have to find ways of issuing more later.

It is important to start from the end and work backwards when planning offerings and acquisitions so that the danger of losing control is minimized.

Learn how to choose between the various structures for your public offering.