What is 'Public Company'

A public company is a company that has issued securities through an initial public offering (IPO) and is traded on at least one stock exchange or in over-the-counter markets. Although a small percentage of shares may be initially floated to the public, becoming a public company allows the market to determine the value of the entire company through daily trading.

BREAKING DOWN 'Public Company'

Public companies are publicly traded within the open market with shares being purchased by a variety of investors. Most public companies originated from private companies that, after meeting all regulatory requirements, opted to become public in an effort to raise large amounts of capital. Examples of public companies include Google Inc., F5 Networks Inc., Chevron Corporation, and Procter & Gamble Co.

Advantages and Disadvantages of Public Companies

Public companies have certain inherent advantages over private companies, including the ability to sell future equity stakes and increase access to debt markets. Once a company goes public, additional revenue can be generated through additional offerings, which involve the creation and sale of new shares within the marketplace. However, with these advantages comes increased regulatory scrutiny and less control for majority owners and company founders. Public companies must meet mandatory reporting standards as regulated through government entities. Additionally, applicable shareholders are entitled to documents and notifications regarding the activities transpiring within the business upon which they hold an interest.

Public Company Operations and Shareholder Interests

Once a company is public, it must answer to its shareholders. For example, certain corporate structure changes and amendments must be presented for shareholder votes. Shareholders can vote with their dollars by bidding up the company to a premium valuation or selling it to a level below its intrinsic value.




SIMPLICITY IN TAX PAYMENT

  • Currently, a startup spends a lot of time and energy to manage the various taxes at various points. It has to deal with VAT, Excise Duty, Service Tax, Octroi, Entry Tax etc. After GST, only one unified tax rate will be applicable. This brings in a major advantage to startup businesses by simplifying the process of tax payment.


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EXEMPTIONS TO NEW BUSINESS

  • Earlier, any business that dealt with goods liable to pay VAT was required to get registration under the VAT act if the turnover crossed Rs. 5 Lakhs. As per the new GST, the limit shall be Rs. 10 lakhs which is a very good thing for startups. Also, businesses with turnover between Rs 10 and 50 lakh are expected to be taxed at a lower rate.

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IMPLEMENTATION OF BUSINESS

  • Any new business needs to have a VAT registration from sales tax department. A business may have to follow unnecessary cumbersome process of registration which may be different in different States. GST will bring about uniformity in process of registration and will only require a centralized registration that will make starting business much simpler.
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SIMPLICITY IN TAX CALCULATION

  • There are many businesses that require the payment of not only Service Tax but also VAT. This makes the calculation for tax very complex. By implementation of GST, only one tax will be required to be calculated and paid. This will make the tax calculation easier.




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