Reading Financial Reports For Dummies, 3rd Edition

Chapter 3

Public or Private: How Company Structure Affects the Books

IN THIS CHAPTER

Looking at the private side of business

Checking out the public world of corporations

Seeing what happens when a company decides to go public

Not every company wants to be under public scrutiny. Although some firms operate in the public arena by selling shares to the general public on the open market, others prefer to keep ownership within a closed circle of friends or investors. When company owners contemplate whether to keep their business private or to take it public, they're making a decision that can permanently change the company's direction.

In this chapter, I explain the differences between public and private companies, the advantages and disadvantages of each, and how the decision about whether to go public or stay private impacts a company's financial reporting requirements. I also describe the process involved when company owners decide to take their business public.

Investigating Private Companies

Private companies don't sell stock to the general public, so they don't have to report to the government (except for filing their tax returns, of course) or answer to the public. No matter ...