WHAT ARE THE FINANCIAL REQUIREMENTS TO GO PUBLIC?

There are no requirements that a company have any net worth or revenue in order to go public.  However, if you wish to have your IPO underwritten by a brokerage firm, you are going to need either substantial revenues or world-changing technology.

For most of us, that is not going to be the case. So, most small companies “self underwrite” their IPO. They find their own investors.

Probably the most difficult thing about preparing an S-1 or Regulation A+ offering is the audit of your financial statements. An audit involves a review of whether your financial statements are prepared in accordance with accounting rules, as well as testing to make sure they are reliable. If you have inventory, you will need someone independent to count it as of the end of your fiscal year. The auditor will test your financial statements by asking for backup on selected items. For example, among your expenses, you have a monthly rent payment, you have telephone bills, you took your clients out to dinner, and you purchased some computer equipment. You sold widgets to a number of people. The auditor is going to ask you for the March rent invoice and a copy of the cancelled check; the same for the August phone bill, the credit card receipt for that $300 dinner, the receipt for the file server, and the paperwork on sales for June 17. If you have all the back up organized, you will be able to get that verification handled and have no more issues.

One of the important things about going public is that you need your financial statements to be completed accurately and timely. If you cannot do this, you will have big problems.