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Review of the Legal Environment of Business

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Review of the Legal Environment of Business
This paper is written as an informational document for business executives on the economic and legal factors that affect company transitions from private to public ownership. Mason (2011) stated there are three top reasons that business entities transition from privately owned to publically owned are as follows: (1) Boatloads of cash. (2) Brand awareness. (3) Playing with the big dogs. When a company goes public, it is really trading for a large amount of cash for profitability and growth. The initial public offer (IPO) is the instrument that represents stock or the representation of what a person or entity puts up as cash for the funding of the company’s desire to make more money. The issuance of an IPO changes the company’s culture that now it must focus on long-term results that previously the focus was on short-term returns.
The cost of IPO issuance is very expensive. The cost include the satisfaction of the accounting and legal costs associated with being publicly-traded. When a company decides to go public, it gets an enormous amount of press, consumer awareness and exposure for new products relating to brand awareness. Brand awareness is a primary factor for the success of the decision to becoming publically owned. Business Week lists just 33,000 public companies around the world (Mason, 2011). After an IPO, a company is free to use that cash however it sees fit, and it never has to repay a penny. However, the costs is so high, few companies can afford to do so.
Going public gives companies a competitive advantage for a number of reasons, according to Mason (2011). The main reason is they have access to more capital, and they can get the capital cheaper than their private companies. Additionally, public companies are no long subject to SEC rules that limit private companies to fewer than 500 shareholders. In other...

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