Business Description

• Part of the application for an IPO with the SEC is to provide a detailed description of your business. This will include information, such as discussing the product the company makes or service it provides, and its business model for profitability. The paperwork also requires that the company identify its leadership structure, the company's top management personnel, and the compensation packages employees receive. The company must identify risk factors that could threaten its profitability. These can include industry competitors, vulnerabilities in the company's supply line and any other factors that could threaten market demand for the company's product or the company's ability to supply that product profitably.
  
  

Financial History

• Private companies can keep their books private. If a company is publicly traded, however, its financial history and current accounts are public information. This is necessary for investors to identify if they believe the company is financially solid and a good investment. Because the SEC's job is to ensure that public companies disclose all their information, a requirement on the IPO filing is for the company to include income statements and balance sheets. The company needs to be ready to turn over other financial data if the SEC requests it as an addendum to the initial registration.
  
  

Use of Funds

• The purpose of an IPO is to raise capital for a company by selling stock in the company directly to investors. Consequently, part of the application for an IPO is to include a plan for how the company will use the funds it raises from stock sales. This information shows investors not only how, and in what direction, the company will grow, but also shows that the IPO is part of a solid business strategy and not a get-rich-quick scheme by the company's owners.
  
  

Offering Structure

• A description of the structure of an IPO, such as how many stocks the company will create and how many of these stocks the company will offer for sale, is a required item on the application for an IPO. This structure will also include the price at which the company plans to offer its initial batch of stocks for sale. This information will show the SEC and independent analysts how much money the company can raise from the IPO. Investors can also use this information, in addition to the other information the company provides about itself, to decide if they believe the IPO will be successful and something in which they want to risk money.