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The method that a business which is incorporated sells portions of itself is through stocks which are exchanged for cash which is used for various reasons. These stocks are sold to an individual or an organization in the form of Shares and are a basically a unit of ownership. The stocks of a corporation give security to the creditors as stock is not considered the property or assets of a corporation. Stock has a declared face value or a par value and there are different classes of stocks. In theory the board of directors and officers of a corporation have a fiduciary responsibility to act in the best interest of the stockholders or shareholders and that is to keep the corporation profitable.

Corporations are businesses where the shareholders transfer money and property for the company’s capital stock. Stocks represent the original capital paid into the business by the people who started the business. Any profits of the corporation are then distributed according to an investment percentage in the capital stock. An owner or stockholder is liable only for the amount of money that is invested. Stocks are considered equity capital because it gives the purchaser equity in the company or in other words part ownership of the company. However a stock holder is not liable for a corporation’s debt. So if the corporation goes bankrupt the stockholders are not responsible for the company’s liabilities.

The corporation can raise money through the sale of stocks and bonds which is a form of capitalization. The control of the corporation is with the board of directors which the stockholders or the holders of Shares choose through voting so long as the Shares are deemed to be voting Shares. Some are not deemed as voting and if not these holders of this stock cannot vote and this is called non-voting stock. When a person or entity purchases stock they are issued a stock certificate which specifies the number of Shares owned by that shareholder, the par value of the stock and the class of stock that was purchased. If the corporation sells bonds this is considered debt capital because the bond holders are lending money to the corporation by buying their bonds.

If you are talking about the total capitalization of a corporation you are referring to the total of the equity and the dept capitalization and the net worth of a corporation which is also called the stockholder’s equity is what is left when you subtract the total liabilities of a corporation from its total assets.

Of course a corporation once formed it has to abide by all of the laws in the state in which it was incorporated or chartered. It also must publish annual reports that are sent to all of the stockholders and also to different government agencies. This is how the investor finds out a lot of information about the company. An annual report may also be considered an advertising report as it generally does a good selling job of the corporation.


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