Family firm going public Essay Example | Topics and Well Written Essays - 2250 words

Family firm going public - Essay ExampleThe family business is boom in many developed and developing countries throughout the world. It is a particular breed of business that stop be more clearly understood by keeping in mind the idea of deuce interconnecting but separate systems. The family and the business argon twain systems in that the goals, needs and tasks of each are not identical. Because of the ambiguous nature of the interconnection, problems gage and do arise. Methods for sorting out the roles and rules for the two systems need to be consciously developed and understood (Bogod & Leach, 1999). The advantages of running a family business are worth reiterating. They bear closed resemblances to those flaccid by entrepreneurs generally a feeling of freedom, a provision of income and great, a sense of creativity. Family businesses can be a satisfying way to provide a living and for family processs to feel collectively rewarded for their personal sacrifices. at a lower p lace the best of circumstances, the family firm can provide a basis for meaningful and enduring family connections. Although there are many advantages, the concept of family business is not free from disadvantages. One such disadvantage arises when the procurement of capital comes into picture. Few, family firms reach this stage, which comes about when the business needs additional capital to continue its operations (Sitorus, 2001). Capital is procured by going public, usually concurrent with the introduction of professional management.... referred to as the primary market and the subsequent affair as the secondary market (Monteith, 1995). It is important to an economy that both markets operate efficiently. Similarly, a liquid a transparent secondary market will encourage investors to participate in the stock market and should over again increase the availability of equity capital and lower investors required returns. (Sitorus, 2001) Until recently limited liability was precisely available to limited companies, which ruled out sole traders because the company had to have at least two shareholders (Kline, 1994). Many traders go round this by setting up private limited companies, with another member of the family holding nominal accounts of shares to qualify for company status. They remained, in reality, one person business. There is now the possibility of limited liability for shareholders companies. There is no upper limit to the number of shareholders. Many family businesses are nonionised as limited companies but others prefer the informality of remaining unregistered (Marchisio, 2003). Many family businesses have been started on this basis and some have grown to considerable size within this format. The main limitation is that shares cannot be made available to the public, which restricts the companys power to raise additional capital through new shares (Bogod, 1999).By inviting members of the public to bear out to the business, it enjoys much wider o pportunities to raise funds. Going public also gives existing shareholders greater liquidity as they can now realize the value of their shares by selling them on the open market (Newman, 1985). Since the shareholders in a family