Issuing Stock to Initial Shareholders: Wyoming Corporation

When you form a Wyoming corporation, you are required to indicate on your Articles of Incorporation the amount of stock you are initially authorizing. This creates your corporation’s stock and determines the different classes of shares. However, the stock has not yet been issued to shareholders.

Issuing stock is what determines the ownership of your corporation. Whoever receives shares of stock is an owner. How much stock they receive determines the amount or share of the company they own.

Stock is issued at the Initial Shareholders Meeting of your corporation.

Class and Number of Shares

Both of these should have been determined when you filed your Articles of Incorporation. The most common classes of shares are Common Stock and Preferred Stock. Most corporations issue only Common Stock.

Common Stock designates ownership in the corporation and generally grants the shareholder basic voting rights. There are no special privileges associated with Common Stock.

If you choose to issue Preferred Stock, you will need to determine exactly what special rights and benefits come with those shares. You can assign any rights or restrictions on Preferred Stock that you feel necessary, and there are no requirements for what benefits the stock must have.

Some common elements of Preferred Stock:

  • PS is considered senior to CS and thus dividend payments are made to PS shareholders first
  • PS dividends are generally fixed at a certain rate
  • PS shares are usually paid out before CS shares in the event of a liquidation
  • PS shares often have no voting rights
  • PS shares often have a fixed liquidation or par value, thus ensuring shareholders they will not lose money on their investment

Capital Contributions

In most cases, the amount of stock an initial shareholder receives is in proportion to their capital contribution, or the value of the assets contributed to the corporation. If I invest $1,000 in assets to the corporation, and you invest $2,000 in assets, normally you would get twice the amount of stock.

A shareholder can also contribute intangible assets, such as expertise in a particular field. It is far more difficult to determine the value of an intangible contribution, but such contributions are often critical to the success of a business.

In some states, there is a minimum required capitalization, or the minimum amount of capital that must be raised in order to form a corporation. That requirement would normally be met by requiring certain levels of investment from your initial shareholders. In Wyoming, however, there is no minimum capitalization.

Stock Certificates

Once you have decided upon what type and how much stock each of your initial shareholders will receive, you must officially issue the stock during the Initial Shareholders Meeting. This is done by your Board of Directors, who will officially issue and approve designating the stock to each shareholder.

Each shareholder should receive a stock certificate, a document which details the amount of stock, the class of shares, and the value of the stock, as well as the name of the shareholder. The certificate is generally signed by the shareholder.

A stock certificate does not need to be a professionally prepared certificate, nor does it need to be signed by any of the corporate officers.

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