When your company needs additional capital, going public may be the right choice, but you should weigh your options carefully. If your company is in the very early stages of development, it may be better to seek loans from financial institutions or the Small Business Administration. Other alternatives include raising money by selling securities in transactions that are exempt from the registration process. We discuss these alternatives later.

There are benefits and new obligations that come from raising capital through a public offering registered with the SEC. While the benefits are attractive, be sure you are ready to assume these new obligations.

Benefits

• Your access to capital will increase, since you can contact more potential investors.
• Your company may become more widely known.
• You may obtain financing more easily in the future if investor interest in your company grows enough to sustain a secondary trading market in your securities.
• Controlling shareholders, such as the company's officers or directors, may have a ready market for their shares, which means that they can more easily sell their interests at retirement, for diversification, or for some other reason.
• Your company may be able to attract and retain more highly qualified personnel if it can offer stock options, bonuses, or other incentives with a known market value.
• The image of your company may be improved.

New Obligations

• You must continue to keep shareholders informed about the company's business operations, financial condition, and management, incurring additional costs and new legal obligations.
• You may be liable if you do not fulfill these new legal obligations.
• You may lose some flexibility in managing your company's affairs, particularly when shareholders must approve your actions.
• Your public offering will take time and money to accomplish.