Tips: Issuing Stocks

Issue Securities by the Book
Any stock or securities grants your company makes must comply with both state and federal securities laws. Typically, the issuance of shares to a small number of founding shareholders qualifies for a "private placement" type of exception from the registration requirements of securities laws. But double-check with your lawyer.

Monitor ESOP Withdrawals Carefully
Pay careful attention to how employees make withdrawals from an ESOP. It is illegal for employees to transfer S corporation stock directly into an IRA, and allowing them to do so could jeopardize your corporation's legal status. You may choose to require departing employees to take ESOP distributions in cash instead of in stock.

Keep Up with Your SEC Filings
Public companies, private companies with more than $10 million in total assets and a class of equity securities similar to common stock, and private companies that list securities on an exchange or NASDAQ must file annual and quarterly reports with the U.S. Securities and Exchange Commission. All SEC filings are available to the general public.