How does a private company go public? What is the process and requirements? Is there a set amount of profit that a company has to make before going public?
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It has been about 40 years since I earned an MBA degree so some things may have changed in what I’m about to say but it is also likely that something similar still exists.
Small companies cannot afford to issue stock exchange worthy shares because the SEC registration, legal fees and financial worthiness analysis would cost well into the multiple $100s of thousands dollars.
Small companies can issue non-stock-exchange shares (I recall these are called “1244 Shares”) but only under rigid conditions, one of which is that you cannot offer the shares to more than 26 people. This requirement eliminates any mass marketing of the shares.
Small companies may be C Corps, C Corps with “S Corp” IRS designation, LLC’s, LTDs, PLLC’s and maybe other forms. Since LLCs are the least expensive to form – costing about $500 if you DIY – with your state Secretary of State. Then you must file an annual 1-page income tax form with your state. As long as the LLC grossed less than (I think) $1.5 million, there is no state income tax due. As you form the LLC, you can declare it as a single-member LLC (single ownership) or a multimember LLC (more than on owner). You can even form a single-owner LLC and and treat the shares as a multiple-owner LLC and dole out stock to multiple members as long as the shares do not pay a dividend (but verify this with your CPA) and then file taxes as a single-level LLC.
Have fun!
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