[arethuza]

If you keep a tight control on the number of shareholders you have there is no reason why you have to go public - of course the reporting standards are going to be lower for private companies, if you don't want that overhead don't go public!

[jacques_chester]

Indeed some companies use multi-level shareholdings to avoid scrutiny (warning: I am not a corporate lawyer and corporations law varies remarkably from country to country. Do not rely on this advice.).

Say you have Actual Company, Inc (ACI). ACI can't have more than 500 shareholders or it must go public.

So instead ACI issues only 500 shares. 250, say, are kept by the 2 founders. The other 250 are divided up as the sole assets of 250 other companies (ACI Holdings Number 1, ACI Holdings Number 2 etc), each issuing 500 shares.

This means that in one sense, ACI has only 252 shareholders. In another sense, it has up to 125,000 owners.

I believe Goldman Sachs used something like this tactic for the recent Facebook deal.

[cletus]

In the US this won't avoid the 500 shareholder limit. This came up in the discussion about Goldman's Facebook investment vehicle. The SEC can make a determination about effective shareholders.

[jacques_chester]

Thanks for the correction.

[arethuza]

In the UK the way to avoid scrutiny as much as possible is to become a partnership (not an LLP though) - you don't have to report very much but you do have the rather scary joint and several liability.

[jacques_chester]

We have partnerships here in Australia too, so too the USA I believe. Same scary joint-and-several thing.

Some partnerships go one step further and become Swiss "vereins". Sort of somewhere between an unincorporated association and a legal partnership.