Interesting question, and we at Prestige Auditors have an answer.
Let’s start our answer by briefly explaining what a stock certificate actually is, because some newcomers are often confused by this term.
A stock certificate is a document which shows, or rather certifies, the specific number of shares or stock in a corporation. It includes ID numbers, the total number of shares that are owned in that corporation, dates, signatures of people involved, etc.
We somehow already gave you the answer to your question, didn’t we?
Before we go further, you’d be interested to hear that not a lot of companies issue stock certificates these days, and most opt for holding statements instead. That being said, stock certificates are still not out of fashion.
Are They Useful?
Absolutely! You can use them to attract more people who’d be interested in investing in your business. Plus, these legal certificates also indicate whatever transferred rights which occur within the business, who gets voting rights, and other subjects of similarity.
So, Which Type of Entities Have the Legal Ability to Emit These Documents?
There are a number of options which you can choose from when you’re taking the first steps of business entity formation, such as LLCs, and corporations.
Both of these entities can provide protection for you on a personal level, but when it comes to your rights in the company, as well as the rights of other owners, they become a little different.
We dropped a hint earlier by saying that a stock certificate certifies the number of shares in…a corporation!
You’ve known the answer all along without realizing it!
That’s right. The Corporation structure remains the sole entity which is legally allowed to emit or issue stock towards its owners. What the stock basically represents, is the extent of shareholders’ ownership in that corporation, and most corporations will let you pass down your ownership to someone else, who will keep all the rights to the share you had before passing it on to them. This is the only business entity which allows you to issue these certificates to whoever holds a share in your company.
What About the LLC?
As opposed to a corporation, an LLC does not include stock, and has membership rights for its owners instead, which designate how much of the assets and income they share, and whether or not they have a say in managing the business. Let’s say if you’re an owner in an LLC and you want to sell your ownership to someone who is not a member of your LLC. When you do, they will have whatever rights you had in terms of finances, but they will not automatically assume company management roles. There is a special process for that.
Here at Prestige Auditors, we can help you form whichever of these two business entities you wish, and set it up for tax exemption as seen fit! Plus, let’s say you’re located in Utah and want to do a Utah business entity search. We can help you out with that as well. Drop us a call and let’s talk about how we get your corporation or LLC formed and get it tax-exempt! And that’s just the tip of the iceberg in what we can do!