A public offering can provide private companies powerful opportunities for growth, but it also entails exposing to regulations and rules they were not required adhere to when they were private firms. As such, it is essential for companies to comprehend the potential risks and challenges prior to taking the leap into public markets.
If you are thinking about an IPO for your company or not, establishing a checklist of best practices is the initial step to ensure that you are prepared. A checklist for an IPO should be able to cover everything from stakeholder alignment and due diligence to financial data collection and analysis. A thorough checklist will help you to pinpoint and close gaps between where your organization is at and where it should be before bells ringing for the IPO bell.
It is a good idea to consult a tax expert if you’re planning to go public. This will help you understand the different types of equity compensation and how they can affect your tax cost. You can then plan according to your needs. For example, if you’ve made an 83(b) decision, you should be aware that you could be subject to a huge increase in taxable ordinary income on IPO day. If you’re using incentive stock options (ISOs), it is important to prepare for the possibility of an alternative minimum tax liability.
An IPO preparation checklist should also provide information regarding the regulatory compliance requirements associated with an IPO which includes the Securities and Exchange Commission’s (SEC) registration and disclosure rules. Your IPO checklist should outline all the steps required to prepare and submit your Draft Registration Statement/S-1 as well as submissions of both EDGAR files and iXBRL instances.
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