An IPO can be an important step in the life of a company. However, there are several steps that need to be taken prior to going public to ensure a smooth transition. One important step is to ensure that there is a good financial team in place to deal with the constant reporting requirements. Because of the scale and growth of the venture, simpler accounting procedures may no longer be enough.
As with any type of business action, it is important to understand the tax consequences of the change. It is recommended that a company going public meet with an IPO adviser who can help a company create a valuation after taxes. Sections of the tax code that a company may want to look at include Section 302 of the tax code, which has to do with net operating losses.
Communication is always key when dealing with the public. Therefore, it is important to improve internal controls to ensure that information being reported is accurate. The CFO and CEO of the company are also encouraged to go on a tour to talk to investors. This tour can help investors learn more about the company and ask any questions that they may have about the operations. The answers to these questions can help investors feel confident that they are going to get a good return on their money.
Going public may be a great way for a company to raise money and/or raise its profile. Prior to the IPO, it may be beneficial to consult with a business law attorney. An attorney may be able to advise a company as to what language may be put in any IPO documents. This may help a company provide accurate information that adheres to state and federal laws.
Source: Entrepreneur, "5 Essential Steps to Prepare for an IPO", Jeff Epstein, November 14, 2014