Stock certificates are legal documents that evidence the ownership of a specific share of a corporation. Stock certificates are issued at varied times in line with the corporate policies. You may issue the stock certificates to your primary investors after incorporation, to secondary investors when the issued capital is being enhanced etc.
Stock certificates are basically of two types. You can issue a registered stock certificate or a bearer stock certificate. Registered stock certificates are issued in the name of a bona fide investors and their name and addresses are recorded in the corporation’s stockholders register. The bearer stock certificates are issued as the name implies is a bearer instrument meaning, the physical possession of the instrument awards ownership.
Forming a corporation is the first step towards issuing stock certificates.. There are formalities and procedures involved in forming a corporation. State laws determine the rules and regulations under which a business can be incorporated in that state. You have to file the necessary application forms along with the articles of incorporation and pay the due fees. The articles of incorporation are your charter under which you will operate as a business entity in the state.
Once the formalities of incorporation is over, you proceed with the rest of the formalities of a forming a corporation. In the Articles the directors of the corporation would have been named. These directors hold a first meeting of the corporate board of directors and act on certain important tasks such as setting the corporate financial and accounting year, adopt the corporate byelaws, authorize issuance of share or stock certificates and appoint corporate office bearers. Once the stock certificates are authorized to be issued by the board of directors, the corporate officers print and issue the stock certificates to the stock holders.
Forming a corporation is best suited for large and medium business where the capital requirements are huge and highly impossible or imprudent for individuals to invest directly. As to the question Why incorporate”, by bringing in a collective of investors and their resources, professional business men manage to raise sufficient capital needed for such large business ventures. By incorporating, a separate legal entity is created and the investors are not personally responsible or liable for the entities actions or obligations. Some of these professionals prefer offshore incorporations to side step many of the restrictive regulations in states and by the federal government. Additional financial considerations like lower tax rates and tax holidays are also attractive terms to them.
