Stocks 101
One of the great advantages of incorporating a business is gaining the ability to issue stock. Issuing shares of stock is a good way for corporations to raise capital for business ventures. When investors buy into the company, they inject money that the corporation can then use to further its business goals, hopefully raising profits as a result. This can cause the stock to increase and raise the perceived value of the company.
Issuing Stock
A share of a stock gives an investor partial ownership of a company. Every shareholder owns a portion of the corporation through his or her investment. A company can issue as many shares of stock as are allowed through the articles of incorporation. The number of investors can vary from just a few to several thousand or more. A newer corporation may start out with just a handful of investors, but as it becomes more popular and more stock is issued, that number may grow to hundreds or thousands of shareholders.
The company itself sets the initial price per share of stock and determines who may purchase stock, if there are any restrictions at all. Once stock is available on the public market, it is fair game to be purchased.
Stock Considerations
When initially issuing stock, there are several rules and regulations that must be followed to avoid securities violations. It is crucial to check with state and federal securities laws to ensure that you follow all policies for issuing and selling stock. Additionally, setting the number of shares is an important consideration. Creating too few shares may require a very high stock price and would give only a handful of people a say in the corporation. However, issuing too many shares will dilute the value of the company to the point that the stock may be considered worthless.
Contact Us
To learn more about issuing stock for a corporation and the legal hurdles involved, contact the Texas business formation experts of Texas Legal Entities today at 512-472-2431.
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