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No matter where you are in your business, you will always need to have money. Cash flow helps with the startup of the company, operation, expansion, and more. Lenders and investors want to see you make more progress before taking more risk. If you are running out of cash flow, it is time to start raising capital.
Selling shares of stock is a risky way to raise capital if it is not done correctly. Many companies use this option as the last resort. If you do this method, make sure that you know how to balance between an authorized stock and how much you have sold. Otherwise, you may lose control of the company.
You must know which document determines the number of shares a company can sell. It is important to know how much money you can secure. It also helps you stay in control of company stock and shows who has ownership of the company.
Issued shares also help businesses borrow money. Lenders look at the shareholder that has the largest percentage. Someone who has a good financial background and good credit will help with the loan potential.
Which Document Determines the Shares a Company Can Sell?
The articles of incorporation include directions for the number of shares a company can sell. Owners that list their names agree on the number of shares.
When you first file the articles of incorporation, you will include the following details:
- Business/corporation name
- Purpose of organization
- Number of shares corporation that can be issued
- Registered office street address
- Names and addresses of directors
- Names and addresses of incorporators
- Printed name and signature of incorporator
Work with an attorney if you need to provide more detailed articles of incorporation. There are fees you need to pay when filing. The Secretary of State then reviews and approves the document so that that your state recognizes your organization as official.
How to Change Which Document Determines the Number of Shares a Company Can Sell?
The corporate charter has the number of shares for sale as well as the price per share. This is how much a share of stock will sell for. If you need to change this information, you need to update your articles of incorporation and then file the amendment with the county clerk’s office.
The rules vary by state. A small business cannot make the changes to the article alone. The shareholders need to be notified and they might need to vote. The majority needs to approve the changes. Afterwards, you can file the amended company article and fees.
How to Sell Company Stock
There are several options you can consider to start selling stock. The most common are the following:
- Going public
- Offering stock to businesses
- Selling stocks to employees
The Bottom Line
Stock is a company asset and selling the stock means you are selling part ownership of the company. One of the reasons businesses fail is due to poor cash flow. It can happen anytime in your business so that is why it is important to understand how stocks work. Stock is a company resource that can be lucrative. Then when it is time to liquidate assets or fund something, you will be prepared.
