This discussion started in other thread and I decided to move it here, because not all my question about shares and shareholders have been answered. :)

First of all few of questions:
1. When company issues it's stocks what does it do? (Just print certain amount of papers, name them shares, and sell them? I think it is more complicated :) )

2. Does all shares give you right to rule company? (I heard about shares without such right, or with limitation of it)

3. Every company can issue shares?

Annette has replied very informatively to your question.

To answer your third question very briefly...

Originally posted by sergio
3. Every company can issue shares?

No... small businesses cannot. A business would need to be incorporated to order to issue shares (private or public).

If you notice Annette's company's name, you will see a suffix at the end "Inc." which means "Incorporated".

In some other countries this would be read as "Plc" or "Limited".

Learner

Not to take anything away from what is being said here, but being a part of a coporation is a lot more involved than signing a document that says you are incorporated.

You have more responsibilities and tax issues. Perfect records have to be kept (should be kept).

A sole proprietor does not have the protection of a corporation, although many businesses think they have full protection over liability because they formed a corporation. Not true. You can still be sued personally as a principal of the corporation, but not as a stockholder.

Hmm.. a little off of the Webhosting talk, but what the heck!

Also when you decide to issue stock you need to come up with a number to represent the entire 100% of the company. Then if a stock is issued at non-par value then that means there is nothing backing the stock other than your word basically. Par value means the stock is backed by real assets, be it money, equipment, real estate, etc.. So for a ver very simple example. lets say 100 shares (just an example :) ) represents 100% of the company and your company has $100 in real assests , then the par value of 1 stock is $1 . But if you have $0 in assests you still could sell the stock for $1 but it would be labeled non-par at least until the company had assets. Thats my take :)

Originally posted by Annette
Well, basically.... :)

Actually, nowadays many companies do not physically print stock certificates (high technology and all that).


But how are this stock option registered? And where? There is some state department, which is doing all this registration? And if I wish to sell some stock what then I do?

Originally posted by Annette

IPOs have underwriters - a brokerage, or several brokerages - who will make sure all the SEC paperwork is in order,


What is "SEC paperwork"?

Originally posted by Annette

A share of stock simply represents a piece of ownership of the company against which it is issued. The more stock shares that are issued, the less ownership each individual share represents (think of the difference between owning a single share of ten outstanding shares, and owning a single share of a million outstanding shares).


But what happens with my shares if company decide to issue more shares?

Thank you, explained it very good :)

Originally posted by Annette
LOL - There certainly is a lot involved. But Sergio was curious about stock by itself. I think it's a tangential issue that came about in another thread. But what would like be without getting off the original topic? :)

The topic came out accidentaly, Learner mentioned IPO-ing company, so I asked. If you know about it more - I'll be happy to know it from you :)

Your knowledge on several subjects has always amazed me, and continues to amaze me further !!!!!!

Also, what we all really appreciate about you is the trouble you often go to... to help others out in this forum.

God bless you... and god bless all the others who regularly help out newbies in this forum too.

Learner

I just want to point out that requirements for stock issuance vary very much by state and (obviously) by country.

Further, while what's been said here is accurate, it for the most part is specific to public stock offerings. I realize that that's the context of the thread, but would point out that some of it may not be necessary for anyone reading this who is considering incorporating and issuing stock. Specifically, there are no requirements for SEC filings in the case of "closely held" small corporations. Of course there are a few caveats to be aware of, and again each state's requirements vary greatly.

For example, my company is incorporated in New York, and NY is a "corporate friendly" state. As long as we offer shares only to residents of New York we're generally governed by New York's Martin Act, and the federal Securities Act of 1933 doesn't come into play unless we make an interstate offering.

Even when you do that, though, there are automatic exemptions under the federal law that general mean you don't have to make an SEC filing for a "small offering."

It's also important to note that, for a close corporation, the requirements for your initial offering are generally simpler than are subsequent stock issuances, and that in most state there is a tax that must be paid if ownership of any shares is transferred or returned to the corporation -- that is, you can't just give stock freely to anyone you like whenever you like.

I guess my point is that the whole thing is too complicated to cover here! If you're considering incorporation, you should consider a lawyer. If you want to do it yourself, take a look at the book series by Nolo Press; they cover just about every aspect of business law quite thoroughly.