How to Create a Publicly Held Corporation

A corporation that is publicly held generally means more prestige, stock options to attract employees and more opportunities to get access to venture capital. Creating a publicly held rather than private corporation adds a few more steps to the process of creating a corporation, and here they are.

Difficulty:

Moderately Challenging

Instructions

Setting up the Corporation

1. Choose a name for your corporation. Check the name's availability by first verifying it with the state's secretary of state in the state where your corporation will be domiciled (housed). Also check the name with the U.S. Patent and Trade Office (see Resources below).

2. Appoint the directors of your corporation. The number of directors is dependent on the rules and regulations of your state. Some states requires as many directors as there are owners.

3. File the paperwork to register your corporation (known as the articles of incorporation) and pay the corresponding fee. Both of these will need to be remitted to the state's secretary of state. You may want to hire a corporate attorney to look over your articles or even draft them for you.

4. Develop your corporate bylaws, which include information on daily operations and shareholders.

5. Hold the first board of directors meeting.

6. Issue the stock certificates to the owners of your corporation.

7. Get the necessary permits for your corporation. You can inquire about licenses and permits from your county clerk's office.

Make Your Corporation Public

1. Select the staff needed to go public. You will need a lawyer, an underwriter and an accountant to create a public corporation.

2. Create a prospectus to submit to the Securities and Exchange Commission (SEC). This prospectus must contain your company's mission statement, brief biographies of directors and officers, balance sheets and pipeline summary. All the necessary forms are available on the SEC Web site (see Resources below).

3. File with the SEC and expect to go through several drafts prior to approval. At this time, you can have an auditor go through your corporation's financial record.

4. Distribute your prospectus to all potential investors.

5. Sign an agreement with the underwriter, who will purchase any shares not purchased by the general public, and issue stock certificates.

6. Announce the initial public offering (ISP) and finish creating your publicly held corporation.

Tips & Warnings

• Public companies must comply with all SEC regulations, including the ethics-based Sarbanes-Oxley Act (see Resources below). Be prepared to enforce these rules in your corporation.

• Expect to spend at least one month in the process of going public as a corporation.

• Too much publicity surrounding your plan to go public with your corporation can backfire. Although word of mouth can drive up the stock desirability (and price), you don't want to invite intense scrutiny just yet or risk failing to meet expectations that are too high to begin with.