The term “business transaction” is used to describe any economic action that is recorded into a company’s accounting system. Businesses make hundreds or even thousands of simple, complex, and ongoing transactions throughout their existence, all of which can contribute to their success or failure. However, there are certain major business transactions that can have greater influence upon a company’s future than others.
Simple, Complex, and Ongoing Transactions
With so many types of business transactions, it can be overwhelming to understand all of them. There are generally three categories of general business transactions. These include the following:
- Simple transactions – These transactions are typically single events between a customer and vendor. These actions can be repeated but they do not have to be.
- Complex transactions – Like the name suggests, these are more complex transactions than simple transactions. This includes actions such as purchasing an item with credit or getting a mortgage to purchase a building.
- Ongoing transactions – These are transactions that do not involve one action. Instead, they are continuous and can include actions such as forming a contract with vendors and suppliers or creating an ongoing relationship with your bank.
Major Types of Business Transactions
Major business transactions can be defining moments in a company’s history that may alter the way a business is run. As a business owner, it is important that you understand these transactions and how they will impact your future. Some of the most common business transactions you may have to deal with include the following:
- IPOs or Private placement
- Stock and asset transactions
- Mergers or acquisitions
- Equity financing
Before entering into these or other business transactions, it is necessary for you to understand them in greater detail.
IPOs and Private Placement
Two of the most monumental transactions a business can make involve expanding and raising capital. The initial public offering (IPO) is arguably the most significant business transaction in a company’s history. The IPO marks the moment a private company’s stock becomes public and available for purchase and trading, therefore changing a private company into a public one. By becoming a public company, a company creates the opportunity to raise more capital so it can expand.
On the other hand, when companies want to raise capital but wish to limit security sales to only a select number of investors, they may choose private placement over an IPO. This small group of investors generally includes banks or mutual funds as investors instead of the entire market.
This can be a complicated topic. If you need assistance with business transactions, a business attorney can answer your questions.