I don’t know if this is consistent absolutely everywhere else in the world, but it’s certainly the case with regards to emerging markets like South Africa, Brazil and even some of the more well-established economies such as that of Western Europe, that being how unlike a lot of Silicon Valley start-ups, the aim is not necessarily to list on the Stock Exchange as an exit strategy. The ideal natural size of all businesses is not necessarily that of going public with an IPO, but there are clear advantages to operating a business in the like of what is still referred to as a Close Corporation in some countries.
In many other countries however, the Close Corporation (CC) has been replaced by its integration into a private company, so where you would have had a CC extension to your company name to represent its type you will now have (Pty)Ltd or Ltd., etc. Whatever the status, there are some key advantages this type of business enjoys over something like a public company.
Faster implementation of key decisions
There are times when it’s imperative to act fast – almost instantly with key decisions that are aimed at moving the business forward in a way that takes advantage of emerging opportunities. If you’re trading as a CC then this can be a quick-and-easy process, but for public companies there would be a need for a general meeting to be called in which all shareholders with decision-making powers would need to be present and put the tabled proposal to the vote.
Less staff to have to manage
Okay, so perhaps this can be true of a public company as well, but this depends on how you go about the management of your staff. With a public company you would have to entrust some major management duties to appointed staff members, whereas with a CC you’d likely only have a limited number of personnel to have to deal with, which means you can interact with more of the people forming part of the organisation and really get to know them better on more of an individual level.
Cost-effective accounting and bookkeeping
Depending on whether or not your business is domiciled in a region which taxes such enterprises, you might be obliged to keep official records of your finances in a specific way. For something like a publically traded company this can make for a very expensive business expense, because you have to adhere to very strict accounting and bookkeeping practices, most of which are just a matter of compliance. If on the other hand you’re operating the equivalent of a CC then you can go for more cost-effective solutions of keeping track of your finances, such as using free online resources with which you can plan and execute small business budgets.
Of course when auditing season comes around you’d probably have to rope in an auditor, but this works out far cheaper than getting in one of the biggest accounting firms which make for somewhat of a requisite for the auditing and accounting of publically traded companies. You’d also not need to hire full-time accounting staff for example.