Hi everybody. This is Aaron Young for Laughlin and we're going to take a minute or so right now and talk about issuing stock. I talked to lots and lots of business owners all around the country, and it's amazing to me how many people have never issued themselves stock in their corporation or issued the membership in their LLC. The main reason that they haven't done it is that they don't know how to do it and they're kind of afraid to make a mistake.
So let's talk about that for just a second. You know when you get your corporate record book, that nice little leatherette book that's got the gold seal on the side of it with the company name on it, we go through it, we look through all the different tabs, we sign we are supposed to and then we get to this place where there are these beautiful engraved certificates. They have your company name on them and they look so cool, and we look down at that certificate and we like it but we don't know what to do with it. So we flip the tab to the next place and we skip over it. Issuing shares is not complicated and it doesn't have to be scary. So, I'm going to tell you exactly how you do it right now.
First of all, shares can be issued in an S-Corporation. They can only be issued to a real person. So, the owner of an S corporation has to be a US person. It can't be a company; it can't be an LLC; it can't be a limited partnership; it can't be any of those sorts of things. The only individual that can own shares of an S-Corp is a real person and it has got to be an American person if it is an American company. So that makes it pretty easy; it can just be to whomever the one is that put the money in for the S-Corporation; it's probably you the one that's listening to this video. In a C-Corporation, there's a lot more flexibility.
C-Corporation shareholders can be a natural person, but it can be a person from anywhere in the world. It can be a fund or another company; it can be an LLC; it can be a limited partnership; it can be a living trust; there's just pretty much any other entity can own shares of a C-Corporation. And here's how you issue those shares. First of all, share ownership is based on the amount of money that was invested in the company or the capitalization of the company. So whatever percentage of capitalization is put in, that's the number of shares that come back out to that investor. Then you simply take the stock certificate, you write in there, (kind of like a cheque, just like writing a cheque) you put in who is getting that certificate, you date it, you issue it and then there is a ledger in your corporate record book that's kind of like a check ledger, and you're right down share number 12345 went to this individual on this date and that's it.
It's really that simple. You take the thing, you issue the share, you mark it down in the ledger and you close the book and put it away. There doesn't need to be any fear. What you do need to fear is the idea of not issuing ownership, not issuing membership because until you've gone through that exercise, and given the membership certificate or the stock certificate you are not a shareholder, and you want to be a shareholder of your business, right? that's one of the reasons you set up that corporation or LLC in the first place. So don't be afraid; take the step and issue that ownership and if you have questions feel free to give us a call here and we'll walk you through the whole process.
For more information or to get in touch with a member of the Laughlin Associates team, go to: laughlinusa.com/ or call: 1-(800) 648-0966