How to Create and Issue U.S. Corporate Shares and Stock.

The Articles of Incorporation express the number of shares the company is authorised to issue. The stock represents money and or property, (buildings, machinery, vehicles, etc) and represents a pro-rata share of the business translated in the form of stock. When shares are traded their status then changes to being “Issued and Outstanding” and they may be traded in exchange for money, property, work or something of comparable value. Once stock has been traded the ownership of the share is proved by a stock certificate which states the number of shares owned and the stock certificate is recorded on the company “Stock Book”.

“Par-Value” & “No-Par Value”

At the outset shares can be given a specified value which is a “Par Value”, lets say for example $1:00 a share, or if the officers and directors wish they can have a “No Par Value” which lets the company directors fix the share value by passing a resolution. The disadvantage in the case of stock having a “Par Value” is that the stock must be sold at the par value or more therefore setting a minimum sale price.

All American States allow the issue of no-par stock allowing the board of directors to fix the stock value and the use of par-value is gradually being phased out of corporation acts. This presents a potential problem for the independent investor who needs to be sure that the stock value judged by the board of directors resolution is accurate and reflects the actual commercial value of the business.

• A Corporation is created and specified in the Articles of Incorporation is authorised 1000 sharesof no-par value common stock.
• Let's say the directors pass a resolution and decide to issue 600 shares valued at $10:00 each.
  
• In the case of there being three directors who wish to buy 50%, 25% and 25% respectively then the majority shareholder pays the corporation $3000:00 and the other two directors pay $1500:00 each. The shares issued and outstanding shares each have voting rights at shareholder meetings which means that directors can pass resolutions at board meetings and as shareholders have voting rights at shareholder meetings. It may be said that this scenario represents in some circumstances the equivalent of having a double edged sword.
  
• The ownership of the stock issued and traded is accompanied by stock certificates for each shareholder and the transactions are recorded in Stock Transfer Book.
• At the close of business the corporation has three shareholders who collectively own 600 shares and the corporation has received $6000:00 of paid-in capital. The company also has 400 authorised but not issued or outstanding shares.

There are many other types and classes of stock that a corporation can issue such as Call Warrants and Preference Shares with no voting rights. The stock type considered here is the basic single-class common stock that has voting rights and for most small corporation this class of stock is sufficient to operate the business effectively and efficiently.

For a corporation to issue stock the following check-list should be followed at the board of directors meeting which must be documented in conjunction with a resolution being passed.

The check-list comprises:

• In the Articles of Incorporation designate the type of share, (Par-Value or No-Par Value) and the number of authorised shares.
• Determine the number of shares that are initially going to be issued.
• In the case of “No-Par Value” shares being initially issued the board need to determine the shares nominal value.
• Determine the division of the shares being issued between the company officers and directors.
• In the event of property being exchanged for shares the accurate value of the property needs to be independently evaluated and established and then exchanged for the equivalent number of shares of stock.
• Authorise the corporate officers to issue the shares to the designated people.
• The company secretary then prepares the stock certificates noting any restrictions about the stock transfer on the reverse side of the certificate.
• Each corporate officer then signs the stock certificates.
• The company secretary then takes receipt of money and property for deposit into the Corporation bank account and accountancy books.
• The company secretary then issues the certificates with receipts for money or property which can also include intellectual property and records the transactions in the corporate stock transfer book.