Ever hear the term "going public" in the business news as the broadcaster talks about some company making changes? It’s likely something you’re familiar with but may not completely understand besides the fact that it has something to do with the stock market and trading. So what does going public really mean?  And how does a company suddenly go about "becoming public?"

The first thing to realize is that there are public and private companies. Private companies are started by an individual or a corporation through private funding via their own money, loans or private sources. They also maintain complete ownership of the said company and are responsible for actions it takes. Private companies do not have to report to anyone in regards to their business practices or earnings. Public companies on the other hand have people they are responsible for reporting to, their investors or shareholders. These investors and shareholder have a say in the way the company is run, organized and important decisions regarding the business’ finances and changes. A business usually goes public to raise capital for expansion and thus gives up some of their rights of ownership and privacy but receives the funding necessary to take the company to the next level.

Going public means a company is open for sale. Stocks are essentially a percentage or share of the company. These go on sale on the open market so anyone who would like to become involved can in exchange for the stock’s current asking price. When a company becomes public they must then follow the regulations of the Securities and Exchanges Commission as well as generate reports on their finances, officials, and so forth which their shareholders can review as well as the general public. Basically everything must be laid out in plain view at this point to ensure no funny business is taking place and the investors are informed of what is going on with their stake in the company.

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Going public can happen in one of three ways. The most common is through an IPO or Initial Public Offering. This is when the company is registered with the Securities and Exchanges Commission and the stock is made known so individuals can purchases equity ownership of the company. This is typically common stock and anyone can buy it. The number of shares available and initial asking price are set by the company’s owners depending upon how much capital they need to raise as well as how many people they want to essentially share their company with.

The second way a company goes public is through a small corporate offering registration known as SCOR. It’s a lower cost, easier way of raising funds than a traditional IPO however only up to one million dollars can be raised whereas an IPO can raise as much capital as needed. Lastly a company can go public by listing their stock offerings on an internet site for sale to accredited investors. This is known as the Angel Capital Electronic Network (ACE-Net).

How a company chooses to go public once they’ve made that decision depends upon their needs and the responsibilities they are ready to be accountable for to their shareholders. Every option has its advantages and disadvantages, it is up to the owners to make the right choice for that specific situation.