Issuing Stock from Your Corporation

A corporation is responsible for filing a notice of stock issuance, preparing stock documentation and certificates, and then issuing the stock certificates to shareholders.

The Articles of Incorporation will state how many shares the company is authorized to issue. All issued shares will represent ownership of the company. Therefore, if a company is authorized to issue 5,000 shares, but issues only 2,000 of those shares, the individual with the highest percentage of those 2,000 shares is the majority shareholder, despite the fact that there are 3,000 remaining shares of unissued stock.

Incorporation rules and regulations do not stipulate how many shareholders a corporation must have. Therefore, in small companies, the shareholders are most often the original owners who started the company. However, as a business expands, so may the number of stockholders, each owning a share of the corporation. While shares of stock are initially purchased directly from the company and held onto by people closely associated with the company, shares may be purchased from other investors in the open market. Ultimately, for larger corporations, this leads to trading shares on a stock exchange, such as the NASDAQ, New York Stock Exchange, or the American Stock Exchange.

When issuing stock in a small corporation, you can 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. A Stock Subscription Agreement will spell out the details of the transaction, including the price per share and the number of shares purchased. A sample Stock Subscription Agreement can be found in Forms & Agreements.