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The initial public offering (IPO) is often a rite of passage for large corporations. The lure of going public with an offering of equity shares in a business can be strong, as it presents opportunities for higher valuations and greater investment from the public.

While advantages are numerous when a company completes a successful IPO, there are unique benefits afforded to a company that makes the decision to remain private. A company may choose to keep its private status in lieu of going public for reasons including maintaining a long-term focus, sustained control over operations, non-disclosure rights and a lower expense burden.

Long-term Focus on Business Goals

One of the greatest caveats in transitioning to a public company is that it has a pressing need to meet the earnings expectations of shareholders every quarter. Management within a public company can get caught up with producing earnings reports every few months, which forces it to focus on short-term gains and, at times, fleeting shareholder satisfaction.

Keeping a corporation private does not require it to provide earnings reports each quarter, nor is it necessary to share revenue details with shareholders. Instead, private corporations can focus attention and effort on long-term business objectives and work toward reaching them without the pressure of short-term market gains.

Sustained Control over Operations

Within a privately held company, business operations remain under the control of the company's owner because shareholders hold no authority over the company. Corporations that go public end up sharing control with investors who want their voices heard. Some shareholders possess voting rights, which leaves the ability for changes within the business a persistent threat.

Drastic operational, personnel or financing changes cannot take place based on the whim of shareholders within a privately held company, and there is no potential for a hostile takeover when a company remains private.

Non-Disclosure Rights

Private companies are not subject to the same public scrutiny as are publicly traded companies. Because public companies' key business data including detailed financial statements and extensive reporting are required to be shared with the public and company shareholders, public companies face a great deal of pressure from regulatory bodies as well as current and potential investors.

However, a private company is allowed to keep financial data private and is not required to disclose major events or new developments to the public. This keeps private companies out from under the pressure of disclosure as long as they remain privately held.

Keeping Expenses Lower

While the financial benefit of going public can be exceptional for business owners, the cost to complete the process is enormous. In addition to the exorbitant expenses associated with an IPO, public corporations also have the burden of filing quarterly earnings reports and other required disclosure documents. Financial regulations imposed on corporations carry a heavy financial burden throughout the life cycle of the business and add a substantial amount to operating cost.

For corporations that choose to remain private, revenue can be used to invest back into the business or to compensate owners or management teams rather than being spent on regulatory or filing costs.

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