Issuing a stock certificate

If you are thinking about incorporating a company, one thing you need to be aware of is what a stock certificate is. The reason for this is that if you plan on incorporating a company your corporation is going to have to issue a stock certificate to its members. How many stock certificates your corporation issues will depend on, if your corporation is going to be a public or private corporation.

If you elect to have a private corporation that means that, your stock is not going to be made available to investors. The only investors in the corporation will be you and your other incorporators. When you choose to have a private corporation a stock certificate is only issued to you and your incorporators, which most of the time are just you. Private corporations can change their status and go public if they determine that they need new investors. Issuing stock in a corporation is one of the best ways to raise additional capital for your business. The problem that private corporations have with outside investors is that they are such a small corporation they don’t want to give any management control to outsiders, so they elect to stay private and raise capital other ways.

Public corporations are corporations that issue stock to outside investors. One of the requirements of public corporations is that their stock is traded on a public stock exchange. Publicly trading their stock allows them to raise capital for their business projects. Another major part of being a public corporation is that you can issue different classes of stock, as long as you have a stock certificate made up for each class of stock. Public corporations must also make their annual financial statements available for the public to see, they must turn them into the SEC each year.

Tagged with: incorporating a company • private corporation • Public corporations • SEC • stock certificate

Filed under: Corporate Administration

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