"Going public" means two different things, and founders often mix them up:
- ›Becoming an SEC-reporting company — filing annual, quarterly and current reports with the SEC.
- ›Having a public market — a place where your shares trade, such as OTC Markets or a national exchange.
You can do the first without the second, and the road you pick decides how you get to both. For smaller companies, there are three main roads that do not require a traditional underwritten IPO. I have worked on all three, and spent sixteen years at the SEC seeing how the agency reads these filings.
Road 1: Form S-1 Registration Statement
A Form S-1 registers securities under the Securities Act. Small companies usually use it in one of two ways:
- ›A direct primary offering — the company sells new shares to investors itself, without an underwriter.
- ›A resale registration — the company registers shares that existing shareholders already own, so those shareholders can sell. This is the common path to creating a shareholder base for a public market.
What it takes: a full registration statement — business, risk factors, management's discussion and analysis, executive compensation, related-party transactions — plus audited financial statements (two years for most smaller reporting companies).
SEC review: the SEC staff typically issues a first comment letter about 30 days after filing. Most S-1s go through several rounds of comments. You cannot sell under the S-1 until the SEC declares it effective.
After effectiveness: the company becomes subject to reporting under Section 15(d) of the Exchange Act.
Road 2: Form 10 Registration
A Form 10 registers a class of securities under Section 12(g) of the Exchange Act. It does not register an offering — it makes the company a full SEC-reporting company.
Key point: a Form 10 becomes effective automatically 60 days after filing, even if SEC comments are still open. You are reporting from that date and must keep answering comments.
When it fits: a company that already has a meaningful shareholder base (for example, from past private placements) and wants to become reporting so those shareholders eventually have liquidity under Rule 144. It is also used by companies that have crossed the shareholder thresholds that require registration.
What it does not do: it does not register any shares for sale. Existing restricted shares still need Rule 144 or a separate registration to be resold.
Road 3: Regulation A (Tier 2)
Regulation A is sometimes called a "mini-IPO." It is an exemption, but one that looks a lot like registration:
- ›Tier 1: up to $20 million in 12 months; reviewed by the SEC and by each state where you sell.
- ›Tier 2: up to $75 million in 12 months; reviewed by the SEC only (state registration is preempted); audited financials; ongoing semiannual and annual reports.
Non-accredited investors can buy in Tier 2, generally limited to 10% of the greater of their annual income or net worth unless the shares are listed on an exchange. You can "test the waters" — gauge interest publicly — before and after filing.
Shares sold under Reg A are not restricted, which makes it attractive for companies that want a community of shareholders and a trading market. Reg A does not by itself make you an Exchange Act reporting company. I compared it with Reg D in Reg A vs. Reg D, and covered the real costs on the podcast: Regulation A-Plus: What the Mini-IPO Actually Costs You.
Getting Quoted: The 15c2-11 Process
Being SEC-reporting does not put your stock on a market. For OTC Markets, a FINRA-registered market maker must file a Form 211 with FINRA under Exchange Act Rule 15c2-11, showing that current information about the company is publicly available. FINRA reviews the filing and may ask questions.
Once cleared, the company receives a ticker symbol and can be quoted. The company then applies to an OTC Markets tier — OTCQB (the venture market) or OTCQX — each with its own eligibility standards, such as a minimum bid price and an annual fee. Companies also usually work to obtain DTC eligibility, so shares can be held and traded electronically through brokerage accounts.
Important: the company cannot pay the market maker to file the Form 211.
Side-by-Side
| | Form S-1 | Form 10 | Reg A Tier 2 |
|---|---|---|---|
| Raises money? | Yes (primary) or registers resales | No | Yes, up to $75M/year |
| SEC review | Yes; must be declared effective | Yes; effective automatically in 60 days | Yes; must be qualified |
| Audited financials | Yes | Yes | Yes |
| Ongoing obligation | 10-K, 10-Q, 8-K | 10-K, 10-Q, 8-K, proxy rules | Semiannual and annual Reg A reports |
| Shares freely tradable? | Registered shares, yes | No — Rule 144 still applies | Yes |
How to Choose
I ask three questions:
- ›Do you need to raise money as part of going public? If yes, S-1 or Reg A. If no, Form 10 or an S-1 resale registration.
- ›Who are your shareholders now? A Form 10 only makes sense if you already have a real shareholder base.
- ›Can you sustain public-company reporting? Every road brings audits, filings and disclosure controls for years. That ongoing cost matters more than the one-time cost of the filing.
What the SEC Reads For
From my years in the Division of Enforcement, the filings that drew trouble shared traits: shell-like companies with thin operations, promoters with undisclosed control, insiders selling into promotion, and risk factors that ignored the obvious. A going-public filing is the start of a permanent public record. I wrote about what the staff looks for in Form S-1 and SEC Scrutiny, and the book has a full readiness self-check: Going-Public Readiness.
Related Reading
- ›Going Public Law
- ›SEC Compliance Counsel
- ›Form 10 Registration: The SEC Review Process
- ›Going-Public Readiness Questions (PDF)
Questions about how this applies to your company? Email me directly at flehrer@securitiesattorney1.com or call (561) 706-7646. No intake form, no screening call.
This post is general information, not legal advice.
Authoritative Sources
- 17 C.F.R. §§ 230.251–230.263 — Regulation A — Electronic Code of Federal Regulations
- SEC: Regulation A Offering Guidance for Small Businesses — U.S. Securities and Exchange Commission
- SEC Form S-1 — Registration Statement Under the Securities Act — U.S. Securities and Exchange Commission
- 17 C.F.R. Part 229 — Regulation S-K — Electronic Code of Federal Regulations
- 17 C.F.R. Part 240 — General Rules and Regulations, Exchange Act — Electronic Code of Federal Regulations
- SEC EDGAR — Full-Text Search of Company Filings — U.S. Securities and Exchange Commission
Primary sources are cited so readers can verify the law directly. Rules and staff guidance change; see our editorial and corrections policy to report an error or an outdated citation.
Frederick M. Lehrer served as an enforcement attorney in the SEC's Division of Enforcement at the Southeast Regional Office from 1991 through 2000, and concurrently as a Special Assistant United States Attorney in the Southern District of Florida from 1997 through 1999, prosecuting securities-related financial crimes. He has practiced securities and corporate law in private practice for more than twenty-five years, advising issuers worldwide on SEC registration, disclosure obligations, Regulation D private placements, Regulation A offerings, and going public transactions. The firm is based in Florida and serves clients internationally.
Questions about how this applies to your company are answered personally — most within the same business day. Flat-fee arrangements available for most work.