Understanding Stock Certificates and Issuing Stock

By David Gass

Now that you have formed your corporation, protected your personal and family assets from the risk of doing business, it is time to issue your stock certificates.

While stock structure and issuing shares may seem very complicated at first, it is not. This useful information should help you make the process a real breeze. Stock structure is pretty flexible and can be amended as the needs of your company change.

No matter how large or small your business is, all corporations have stock; even those that are privately owned. A corporation is responsible for filing a notice of stock issuance, preparing stock certificates, and issuing stock certificates to its shareholders.

Stock represents ownership of the business.  For you or anyone else to have an ownership in a corporation, shares of stock must be issued. When you structure your corporation, you will designate the number of shares that you will want to issue. These shares will exist as soon as your corporation is filed with the secretary of state.

Your Articles of Incorporation will state how many shares the company is authorized to issue. Basically, all issued shares will represent ownership of the company. Usually, a corporation does not issue all of its shares at the start of business as it probably will wish to save some shares of stock in reserve to be issued at a later date to raise capital for the corporation.

  
Many small corporations have only one stockholder, the person who started and runs the business. Regularly, a founder’s spouse or children are stockholders.  A stock certificate is the physical evidence of ownership of shares in a corporation. It is also referred to as a share certificate.       

Subsequently issuing stock in a small corporation, you will be able to determine who will receive shares of stock, what percentage of the corporation each shareholder will own and how much shareholders will pay for each share of stock.

Other important stockholders can include investors, friends, business partners and employees.  Stockholders are also referred to as shareholders.  Basically, shareholders significance in the company is proportional to the amount of shares that they own.

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