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Incorporating a Business E-mail
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Article Index
Incorporating a Business
Benefits of Incorporating
Right Corporate Structure
Steps to Incorporate
Where to Incorporate
Incorporation Help
Corporate Compliance
Building Corporate Staff
Re-Investing
Closing Your Corporation
State Level Resources
Legal Document Templates
Comments

Re-Investing Your Corporate Profits By Selling Corporate Stock


Your main goal in running any business or having a corporation is to make money or have some sort of financial gain. There are certain ways in which you can make a profit based on your corporation. One of the main ways to make money is to sell your corporate stock.

Corporations choose to sell their stock to raise capital for the most part. This could be done to expand your business or add new technology to your outdated business. When you are using your stock to reinvest in your business there are certain issues that need to be taken care of first. The main concern will be federal laws. You need to understand them fully before giving your stock to someone in return for money. The investors need to know the full risk of involvement in your corporation and that should be done with full disclosure. You also have to register your securities with the SEC and distribute a disclosure statement. Strict compliance is mandatory and securities can be difficult if not handled in the proper way. Your best bet is to hire a securities lawyer to handle all the intricacies of selling stock and reinvesting your corporate profits for additional money.

When you issue stock to yourself, your family, or a few partners then most security laws do not apply because you can sell stock to a small group of people without advertising it. This also gives you the ability to take advantage of private offering exemptions. You do however have to limit the amount of people who can invest in the stock and when you do so, you need to know that the stocks can not be used for immediate resale to other investors. You can also avoid federal securities laws if you offer stock to residents in only one state.

It is possible to get exemptions through the SEC for selling stock, especially if you are a smaller company. If you have fewer than 35 investors then you are eligible for private placement exemption. To get this you must not have paid commissions to anyone or advertised your stock for sale.

If you do choose to advertise your stock, even online, then all the laws that apply to offline securities also apply to this transaction. The stock value must be paid for at a rate not less than its full value. Money must change hands at the time of the sale. There can’t be any IOU’s issued for the price of the stock.

If instead of receiving money for your stock, you can also receive property. The directors as a whole have to agree on the fair value of the property and the stocks that you trade should be equal to this value. You will then have to draw up a bill of sale that lists every bit of property being exchanged for the stock so that later you cannot be personally held liable for anything dealing with the property. Consider the fact that you might also have to pay income tax on it as well.



 
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