Public company definition
/What is a Public Company?
A public company is a business that has issued securities through either an initial public offering or following a reverse acquisition of a public shell. In addition, those securities must be trading on either the over-the-counter market or a stock exchange. A public company must also comply with the reporting requirements of the relevant governing body, which in the United States is the Securities and Exchange Commission (SEC). The SEC requires the filing of the annual Form 10-K report, as well as quarterly Form 10-Q reports, and numerous lesser reports on the Form 8-K.
The key defining characteristic of a public company is that any investor can buy or sell its securities. This is not the case with a privately-held entity, where the securities are not registered for public trading. This means that the price of a public company's securities can be bid up or down by investors, based on the demand for its shares. The most recent price at which its shares trade determines the total market value of the company.
Related AccountingTools Courses
Public Company Accounting and Finance
Advantages of a Public Company
A public company has the advantage of being able to sell its securities to investors, so it can raise capital more easily than a privately-held entity. This may allow it to purchase other businesses or fund operations through a rapid growth cycle.
Disadvantages of a Public Company
The regulatory costs of staying public are burdensome. These costs include maintaining a comprehensive system of controls, having an annual audit done by outside auditors (as well as quarterly reviews) and employing securities attorneys to inspect all filings before they are released.