The decision to go public is one of the most consequential a business owner will make. It is also one of the least understood outside of legal and investment banking circles.
Most of the content written on going public in Canada is produced by law firms and investment banks, for lawyers and investment bankers. Dense, technical, and focused on process mechanics rather than the actual question most founders and owners are asking: is this right for my company, and what does it actually mean for me?
This series of articles takes the accountant's perspective. We cover the real reasons companies pursue an IPO in Canada, what you give up, and the tax consequences that rarely get plain-English treatment. We also cover the alternatives, because a traditional IPO is not the only path. This is Part One of a three-part series. Part Two covers the step-by-step process. Part Three covers what changes after you list.
There are four legitimate reasons a business pursues an IPO in Canada, and one honest qualifier that applies to all of them.
Access to capital. Public equity markets provide a deeper, more flexible source of funding than private rounds of investment or debt financing. You are not negotiating with a limited number of even a single investor group, and your shares can be used as acquisition currency when the right opportunity arises.
Founder and investor liquidity. Going public creates a market for existing shareholders to realize value. This is usually subject to escrow and lock-up restrictions initially, but the path to exit is clear in a way private markets cannot fully replicate.
Profile and credibility. Public company status raises a firm's visibility with customers, partners, and talent. For companies competing for enterprise contracts or large-scale partnerships, the benefits of going public in Canada extend well beyond capital.
Succession and exit planning. For some owners, an IPO is part of a longer-term plan to transition out of day-to-day operations. Having public company stock option, DSU, and RSU plans allows the Board of Directors to attract top talent.
The honest qualifier: not every benefit materializes equally for every company. Size, sector, and timing all affect whether these advantages apply to your situation.
Going public involves costs and obligations that get underplayed during the excitement of the process.
Dilution and loss of control. Your ownership percentage decreases as new capital is raised and also when you sell shares into the market, and decisions that were once entirely yours can now require board and even shareholder approval. Public company governance changes how you operate at a structural level.
Loss of privacy. Financial results, executive compensation, material contracts, and related-party transactions are on the public record. This is not optional and it does not change over time.
Compliance burden. Continuous disclosure requirements, quarterly reporting, CEO and CFO certifications, audit committee requirements, and securities filings are ongoing obligations. They compound across legal, accounting, and management time every reporting period.
The full cost picture. Underwriter commissions on a traditional IPO typically run 5 to 10 percent of gross proceeds. Even for a small go-public transaction, legal fees often land between $300,000 and $500,000 or more. Audit and accounting fees add $150,000 to $300,000 or more. Annual compliance costs continue after you list. Anyone asking whether their company should go public in Canada needs to understand these numbers going in, not mid-process.
Shareholder pressure. Public company leaders operate under ongoing scrutiny to deliver quarterly results. If your business performs better with a longer time horizon, this tension is real and persistent.
This is the section most IPO guides skip. It is also where some of the most significant financial decisions are made.
Loss of CCPC status. Once your company goes public, it is no longer a Canadian-Controlled Private Corporation (CCPC) under the Income Tax Act. The small business deduction (ITA Section 125), which provides a reduced federal tax rate on the first approximately $500,000 of active business income, is no longer available once CCPC status is lost.
Capital dividend account (CDA). Your capital dividend account allows a private company to pay tax-free capital dividends to shareholders. CDA access disappears when you go public. Any balance needs to be planned for and, if appropriate, accessed before the IPO closes. This is not a planning window you can reopen.
Dividend tax treatment. Because they are taxed at the highest corporate tax rate, public companies pay eligible dividends, which carry a higher dividend tax credit for shareholders. Non-eligible dividends paid before the IPO (common in private companies) are taxed at a higher effective rate. This distinction matters in pre-IPO planning.
Lifetime capital gains exemption (LCGE). Eligible shareholders in a private company may be able to access the LCGE on qualifying small business corporation shares prior to going public. As of 2024, the LCGE for qualified shares is $1.25 million (indexed annually). This is a planning window, not an automatic benefit. Proper planning allows private company shareholders to increase the basis of their public shares by triggering a gain equal to their remaining LCGE, generating significant tax savings on subsequent public company share dispositions.
Stock option taxation. Share-based compensation becomes more complex after listing, with different tax treatment depending on how options are structured. Public company shares tend to have reduced stock option benefits versus their private company counterparts.
None of this is a reason to avoid going public. It is a reason to engage a financial and tax advisor well before the IPO process begins.
A traditional prospectus IPO is not the only path to public market access or liquidity. Understanding the alternatives is part of making a sound decision.
Reverse takeover (RTO). An RTO involves acquiring a company that is already listed to gain a public listing without a full prospectus process. It is faster, typically less expensive, and suited to companies that want public market access but are not yet ready for the traditional route.
Capital Pool Company (CPC). The TSX Venture Exchange's CPC program allows a new listed company to raise capital and then acquire a private operating business through a qualifying transaction. This is also a reverse takeover, but the CPC is a clean shell that has not had prior operations. Common with junior resource companies and earlier-stage businesses, the CPC usually has cash to fund some or all of the go-public process and provide working capital.
SPAC (Special Purpose Acquisition Corporation). A listed blank-cheque company formed to acquire a private business. Similar in logic to a CPC, but typically at a larger scale.
Private equity and growth lending. For companies that want capital without the obligations of a public listing, PE and growth debt are sometimes the better answer. The IPO vs staying private in Canada decision comes down to which structure matches your timeline, capital needs, and operational appetite.
For guidance on IPO advisory services, the right path depends on your company's size, investor base, and where you are in your growth cycle.
Cross-listing is a path Canadian public companies can use to access US investor capital. The most common entry point is the OTCQX Market, which allows CSE, TSX or TSXV-listed companies to trade in the US without a full SEC registration, using an exemption available to qualified foreign private issuers.
Going straight to a primary US listing on the NYSE or NASDAQ is a different undertaking entirely. The cost to list and operate as a US public company runs two to three times higher than a Canadian listing, both upfront (SEC registration, additional legal and audit fees, US underwriter commissions) and also on an ongoing basis (Sarbanes-Oxley compliance, US securities counsel, additional reporting obligations including PCAOB-compliant audits and quarterly reviews).
As a practical threshold, a direct US listing generally makes sense for companies that are significantly larger in scale or specifically need to raise more than $50 million in US capital. Below that threshold, the compliance burden and cost typically outweigh the capital access benefit.
For most Canadian companies, the TSX, TSXV, or CSE listing comes first. The US cross-listing follows once the business has scaled and the capital need justifies it. Companies pursuing both Canadian and US listings or managing US shareholders should address the cross-border tax implications for companies with US shareholders or a dual listing early in the planning process.
Before hiring lawyers and bankers, answer these questions honestly.
Do you have audited financial statements? Most CSE, TSX and TSXV listings require two or three years of audited financial statements prepared under IFRS. If you have been reporting under ASPE, or any non-IFRS generally accepted accounting principles, a conversion is required and it takes time... then the 'new' IFRS statements have to be audited.
Does your management team have public company experience? Underwriters and regulators assess board structure, governance capability, and CEO and CFO-level depth. Gaps here slow the process and affect pricing. If you are raising capital concurrently, a strong team generally leads to higher capital raises; more money in the bank once you complete the go-public process.
Can you sustain the compliance cost and management distraction? Going public typically consumes 6 to 12 months of senior management time and significant capital before a dollar is raised.
Is your company at the right stage? The TSX has minimum financial thresholds. TSXV and CSE listing requirements in Canada are more flexible, but standards still apply. Know them before engaging advisors.
Have you done the pre-IPO tax planning? Corporate restructuring, CDA access, LCGE triggers, and share class reorganizations need to be considered before going public in Canada and can make a meaningful financial and operational difference. This is the IPO readiness Canada accounting work that needs to happen before the legal process begins. For companies with international operations or cross-border shareholders, early planning around cross-border obligations is equally important.
Most companies get the sequencing wrong.
Legal counsel. Securities law, prospectus or listing statement preparation, and OSC or other securities commissions filings require specialists. Generalist corporate lawyers are not equipped for this work. Bringing a good securities lawyer onboard at the same time or shortly after a specialized accounting advisor like Forbes Andersen is mission critical.
Investment bank or underwriter. Leads the offering syndicate, guides pricing and marketing, and conducts due diligence. Often a syndicate is constructed to raise money alongside the go-public process. Data rooms, financial projections, operational commentary, road shows, and many meetings with management are part of this piece of the puzzle.
Auditors. Two or three years of audited IFRS financials are required. If you plan to dual-list in the US, your audit firm needs to be PCAOB-registered.
Specialized accounting advisor. This is distinct from your auditor. The accounting advisor handles pre-IPO financial matters. Forbes Andersen has been in this role many times; preparing projections, converting financial statements to IFRS, writing Management Discussion and Analysis, quarterbacking auditors and lawyers, building and vetting prospectuses and listing statements, and taking some of the pressure off management. And it needs to start earlier than most people expect.
Chief Financial Officerj. Many private companies pursuing a public listing lack the internal finance capability for public company reporting. Fractional CFO support can fill that gap during and after the transition.
Ready to discuss your Go-Public readiness with our team?
Going public in Canada is the right move for some companies. It is not a default growth strategy and it is not free.
The benefits are significant: access to capital, liquidity, credibility, and a platform for acquisitions. But so are the costs: increased expenses, constant compliance (it never stops), governance obligations, and loss of privacy.
The companies that navigate going public in Canada well are the ones that plan early, sequence their advisors correctly, and understand what they are committing to before the process starts, not during.
If you are seriously exploring going public, the accounting and tax implications deserve attention before you commit to a timeline.
Access to public equity capital, founder and investor liquidity, acquisition currency through shares, and increased market credibility. The benefits are real but conditional: company size, sector, and timing all affect whether each benefit materializes in practice.
The TSX Venture Exchange and the Canadian Securities Exchange have lower financial thresholds than the TSX. The Capital Pool Company (CPC) program and reverse takeover (RTO) route are also available for earlier-stage businesses that are not ready for a traditional prospectus IPO.
The most significant losses are CCPC status (and with it, the small business deduction under ITA Section 125), access to your capital dividend account, and certain planning opportunities tied to private company structure, including LCGE eligibility on qualifying shares.
A reverse takeover (RTO), Capital Pool Company (CPC), SPAC, or remaining private with private equity or growth debt financing. The right alternative depends on your company's size, investor base, and capital requirements.
Typically 6 to 12 months, depending on the exchange, company readiness, and transaction complexity. The step-by-step process and cost breakdown are covered in Part Two of this series.
Mike Johnston, CA, CPA, is a partner at Forbes Andersen LLP specializing in going public transactions and financial reporting (IFRS, ASPE, US GAAP). If you would like additional information regarding your organization’s going public or financial reporting requirements, Mike can be reached at mike@fa.ca or 416-947-0464 ext 232. This article is for informational purposes only and does not constitute financial or other advice.
