A company "goes public" when it offers shares of stock to investors with no direct connection to the company. An IPO, or initial public offering, of common stock is the most common way to "go public," although it is possible to offer stock to outside investors through private placements. An IPO is done in conjunction with listing stock on an open market, such as the New York Stock Exchange or Nasdaq stock market.

Why Go Public

Any offering of public stock is a way for a company to raise capital to expand or improve its operations, products or services. It can also create stock a company can use to acquire other businesses or use as an enticement to retain or attract talented employees. It also is a way for those who initially invested in starting a company to recover or expand their investment.

IPO Rules

The federal Securities and Exchange Commission says it takes three to six months to complete an IPO registration and other paperwork required. The registration describes the company, its initial stockholders and officers, how much money is expected to be raised and how it will be used. It also requires audited financial statements, as well as a listing agreement with the exchange or market where stock will be offered for sale.

Direct Offering

A DPO, or direct public offering, is similar to an IPO and requires most of the same steps. The big difference is that an IPO states in advance how much money will be raised through selling shares. If the offering is not fully subscribed, that is, if all those shares aren't sold, the IPO is canceled. A DPO is more flexible, allowing the sale of shares but without the restriction on a number that must be sold.

Private Placement

Another option is private placement, selling shares to qualified investment banks, called QIBs, to raise money more quickly without the advance preparation for an IPO. The company then has up to a year to complete the SEC registration and requirements. Shares can be sold or traded by the QIBs without going through a formal market like the NYSE or Nasdaq. Private placements are still subject to SEC regulations.

Confidential IPOs

The federal Jumpstart Our Business Startups Act effective in 2012 allows emerging growth companies to make "confidential" IPO filings, in which information is kept private until 21 days before a formal IPO presentation, called a "roadshow." These allow companies with less than $1 billion in revenue to get feedback from the SEC and investors before deciding on a formal IPO.