One of the perks of forming a corporation in Texas, Tennessee, or any state, really, is that you have the option of issuing stock. Having stockholders can provide a much-needed cash infusion for your business.
Let’s look at what it takes to complete this super simple process.
Step 1: Decide How Many Shares You Want to Issue
Once you’re incorporated, if you want to offer stock and share ownership of your company you can purchase stock certificates. Now, if you formed an S Corp, you are typically limited to 100 shareholders, although you can fill out paperwork to raise that number significantly higher. But you don’t have to open up all your shares at first, especially if you think you might want to raise funds later.
Decide how many shares you want to offer. Realize that every share you offer someone else is a percentage of ownership in your company. While you get money with every share purchased, you also lose a slice of ownership. You can set aside what’s known as F stock (founder stock) so that you and any partners you have still retain a majority holding.
Step 2: Set Par Value
Now you need to decide what a share of your stock is worth. Check to see if the state where you incorporated has any requirements for par value. You may be able to set your stock value at a fraction of a cent, unless your state says otherwise.
Consider how much you’re trying to raise in total. If you issue 100 shares and want to raise $10,000, then each share is worth $100. Now, keep in mind, if you wanted to reserve some of those shares for later (or for yourself), this will cut down on the amount you can raise.
Step 3: Fill Out Your Stock Certificates
Once you start selling shares of stock, make sure you fill out a stock certificate as legal proof of ownership of shares. Also record each purchase or transfer in your stock ledger.
It’s as easy as that to issue stock for your corporation! Now you have more money to invest back in your company, and you can continue to grow over time, with the help and support of your shareholders.