Monday, November 28, 2011

What is a company's authorized stock?

A company's authorized stock is the number of shares that it may legally issue. The amount of authorized stock will appear in the articles of incorporation that a company files with the secretary of state during the beginning of its existence.

A corporation cannot issue more stock, or stock of a different class, that the articles of incorporation authorize. This is why it is important for a company to anticipate its future financing needs when preparing its articles of incorporation.

However, with approval of the board of directors or shareholders, the articles of incorporation may be amended to increase the number of shares authorized, or to create an entirely new class of stock for selling to investors.

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