Being on the stock exchange may seem exciting, but the reality is there are numerous advantages to being a private as opposed to a public company. Choosing to structure your business as a private company has numerous benefits. Find out what you need to know here.
First off, let us address the legal similarities and benefits that a company has over a non company for a business. Both private and public companies enjoy limited liability which means that you are not personally responsible for the debts of your business. Secondly, a company has better access to capital and able to borrow more to finance developments than a non-company. Thirdly, a company allows business revenue to be taxed at the corporate tax rate.
A key benefit of a private company is the lack of stock price for you and your company to worry about. A stock price can lead to directors and management being focused on the variations in stock price. This can undermine long term planning and investment which may suppress current finances and stock prices for a future pay off. A private company allows you to pursue long term projects without fearing shareholders’ wrath for a drop in stock price.
Going through an IPO and maintaining a public company as opposed to a private one is an expensive process. Particularly if your business is still relatively new or developing, it usually often is not worth the expense to make your business public as opposed to private.
A private company has less extensive regulations that you need to comply with than public companies. For example; private companies are allowed to have only one director as opposed to public companies which require three. Furthermore private companies have less disclosure requirements than public companies, saving you both time and money.
Private companies allow the owners to make decisions regarding who is able to acquire shares. This is not the case with public companies whose shares are for sale on the stock exchange. With a private company you get to decide who owns shares in your company, so you can ensure your fellow owners share your vision.
Therefore the key benefits of a private company are they are easier to manage and help better achieve your vision. If you need further advice regarding starting or running a private company, get in touch with a business lawyer today.
Don’t know where to start? Contact a LawPath consultant on 1800 529 728 customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.