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A public company is a company that is legally permitted to offer registered stock and securities for sale to the public. This is usually done through a stock exchange, such as the AMEX, NYSE, etc.
You can also become a reporting public company with the SEC. The company will file an S-1 registration statement with the SEC, and must follow other procedures including blue sky laws.
Usually a public company is owned by many investors, while a private company is owned by a few shareholders and principals. Although a company may have many people with shares of their stock, that doesn’t mean it is a public company.
Advantages of being a Public Company
Public companies are able to raise capital by selling stock to the general public if they file an S-1 registration statement. This is the reason so many companies desire to go public, either through a direct offering or an Initial Public Offering (IPO). Before public companies were around, it was very difficult to raise capital in large amounts for private companies.
Public companies may also issue their stock to key employees and executives as an additional incentive. This can help them attract and retain high-caliber employees for the long run, which will in turn make their business more of a well-oiled machine.
Increased market valuation is another advantage of being a publicly traded company. Value typically increases by simply being a public company with a stock symbol. If a business looks to be bought or sold, being a public company is only going to help them get a higher dollar amount for their company.
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