May 15, 2017 The Benefits of Keeping a Company Private
If you own all, most, or even part of a private company, you may have wondered from time to time whether it is a good idea to take that company public. There are many benefits and reasons to take a company public, not the least of which is the monetary rewards that often follow. But there are also considerations that work in favor of keeping a company private.
These principles were recently put on display when changes to the ownership of a world famous California burger chain were announced. When a person says world famous California burger chain, In-N-Out and Habit Burger frequently come to mind. This story involves the one which is still private: In-N-Out. This restaurant came from humble beginnings in California and has grown to be one of the most famous chains in the world.
According to reports, the founder and controlling owner of the restaurant turned control over to his granddaughter. She received a 50% ownership interest in the company when she turned 30, and for her 35th birthday, she became the sole owner. While a company that is estimated to be worth over a billion dollars is a great birthday present, it also comes with a lot of responsibility.
The owners of a private company are free to run the company as they see fit. When a company is public, however, it must answer to a large number of shareholders, most of whom are strangers. That is where much of the tension comes in deciding whether to take a company public—the big issues are control and privacy.
A Contrast in Examples
This latest story about how a large private company does its business can be compared to the recent IPO of a popular California tech company, Snap, Inc., the company behind Snapchat. That company was privately held until earlier this year when it went public and started trading over 200 million shares. Now its future will be determined by a large group of strangers.
So, what is in store for this newly offered public tech company? It now must answer to regulatory agencies, media publicity, and the demands of an increasing number of shareholders. And while that is not always a bad thing, it does change how business is done. Shareholders are primarily, if not solely, focused on the bottom line whereas a privately-held company can continue to run according to its own values.
No Right or Wrong Answer
The important thing to remember is that there is no right or wrong answer in most cases. It comes down to personal choices, business goals, and the future of your company. What is important is that you get the right counsel, legal advice, and direction before making these and other difficult decisions affecting your company. That is exactly what we offer at the Royse Law Firm. We are here to help you accomplish the vision you have for your company, whether you intend to keep it private or go public. Contact us today.Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.