What is a Stock Corporation?
A stock corporation is a corporation for profit which contains stockholders, each of which gets a fraction of ownership of the company by shares of stock. These shares might get back profits on their investment in form of dividends.
Shares are put to use for voting on corporate policy making or for electing directors, at the annual meeting or at other meetings of the industry.
What initiates the formation of a Stock Corporation?
As soon as a new corporation is formed decisions are required to be made about the kinds and amount of stock that will be provided for sale.
The more the amount of stock the increased number of ownerships there will be. It also depends on the corporation whether the stock will be provided for sale privately or in public.
After getting done with the decisions the Articles of Incorporation contain the initial price and number of shares to be issued. The industry then starts its process of offering the stock for sale in public or in private.
If one person owns a single stock more than any other individual that particular figure is said to have controlling interest in the corporation.
Why do Corporations share their Stock?
If an individual owns a stock in corporation he or she shares the ownership of that corporation. People having shares of stock in a corporation are called either stockholders or shareholders.
Having stock shares in the corporation means
- Way for the corporation to make money. The buying of these shares of stock helps the corporation’s finance to initiate, expansion and operations.
- Right for the owner to make decisions. On purchasing share(s) an individual gets the right to vote at annual meeting of corporation, to elect members of board, and is allowed to speak in the corporation’s direction.
- Right of owner to get dividends. The basic reason commonly people buy shares of stock is to receive dividends.
What is actually happening is by selling stock shares the board of directors of corporation is trading its own decision making power and is sharing its financial benefits with its shareholders for the money being received.
There are also other corporations like nonprofit corporations that don’t give stock but instead give memberships. In particular the stock corporations are divided into two parts
- Stock Corporation
- Non-Stock Corporation
A brief introduction to non-stock Corporation is that such corporation doesn’t include owners represented on the basis of stock.
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