Stocks are the basis of nearly every business, and they represent a partial ownership in a company. Be it a C Corporation, S Corporation, Limited Liability Company (LLCs), Limited Partnership (LPs) or Limited Liability Partnership (LLPs); every business entity designates ownership by issuing Shares of Stock, Membership Interest or Partnership Interest respectively.
What is a Stock Certificate?
A Stock Certificate was previously also known as a Share Certificate. It represents an ownership and legal interest in a company’s Common Stock and its related stockholder rights.
Stock Certificates include information such as the number of shares, an identification number, the date of issuance, and other related information.
To avoid duplication, Certificates normally feature complex design, a Corporate Seal, and various signatures. Often, Certificates serve as proof of entitlement to dividend payments with a receipt of payment attached to them.
These days, securities are recorded electronically using a process known as book-entry form. The Electronic method eliminates the requirement to issue paper certificates to represent ownership. With book-entry, ownership of securities is never transferred physically when the securities are exchanged; rather, accounting entries are simply changed in the books of the commercial financial institutions where investors maintain accounts. This offers the advantages of any modern electronic record keeping system.
Stock Certificates Before Electronic Record Keeping
Before electronic record keeping was possible, Stock Certificates were actually an unusual piece of work in their own way. It was reasonably common to receive a Stock Certificate embellished with ornate engravings, decorated with fancy designs, and approaching artwork in and of themselves.
In other words, the stock certificates have the complex and unique designs, which is known as branding these days.
Features of Stock Certificate
- Full-sized: The stock Certificate is full-sized. Its dimensions are 8½ x 11.
- Security Serial & PIN Numbering: The Stock Certificate is made from alphanumeric serial numbering using various style and pattern.
- Customized with your company’s name: Your company’s logo is printed on stock security certificates which will give you an extra level of security and will prevent misuse of the stock certificate.
- Anti-Copy & Anti-Scan: It is difficult to copy or scan a stock certificate as it has the company’s logo.
The Benefits of Owning Stock Certificates
Do you know that owning Stock Certificates can make the investment in your business more than just numbers on a financial report? Here are some of the benefits of owning Stock Certificates:
- With Stock Certificates, you have a physical record that you can use for legal purposes. This advantage will become essential if you ever find yourself involved in a dispute over stock ownership. You can also use your Stock Certificate to help you pledge your holdings as collateral for a loan. Even after your death, your legal advisers and heirs have an accurate record of your stock ownership.
- You have actual evidence that you own part of a Major Corporation. The Stock Certificate is issued with the owner’s name and other important information about the Corporation and the number of shares held. Remember that the Stock Certificate is not the stock itself. Instead, it represents in physical form to prove that you own stock in the company.
- Stock Certificates are wonderful works of art. You can obtain Stock Certificates and frame them to display in your office or home. For the business owner, framed Stock Certificates can reproduce a beneficial reward for employees who own stock in your business.
What Is Included on a Stock Certificate?
Your Stock Certificate contains all of the information needed to track it and your ownership of it:
- Names and Dates: A Stock Certificate contains a series of names. It has the name of the company whose stock is described. Your name will be included in the Stock Certificate, certifying that you are the owner of the stock. After that, the certificate will be dated, indicating the day on which you became the owner of the shares.
- Numbers: A Stock Certificate contains a group of numbers on its face generally. Each Stock Certificate has its own certificate number, issued by the company, which enables it to be tracked. It also has a CUSIP number issued by the Committee on Uniform Securities Identification Procedures which is also used to track the certificate. Ultimately, it also has the number of shares that it represents written on its face.
- Signatures, Seals, and Artwork: Your Stock Certificate is designed in the way you want. These certificates can be relatively plain, while others can be highly decorative, featuring artwork that represents their businesses. Most certificates are signed by a company representative and by the person responsible for registering them. You can even add a seal for authenticity.
- High Transaction Fees: Deciding to do business with Stock Certificates carries a big drawback. Most brokerages will not be happy to deal with them because they’re expensive and inconvenient to handle. As such, while you might be able to trade stocks online for a few dollars a trade, it’s not uncommon to have to pay fees that run into the hundreds of dollars to trade using your Stock Certificates.
Do I need ownership certificates if I do not offer ownership to the public?
Yes, you do need Ownership Certificates even if you don’t offer ownership to the public. Since every business entity, from Corporations to Limited Liability Partnerships (LLPs) all have owners and this ownership must be properly documented, even if ownership is not offered to the public.
For Corporations, issuing shares it is required. Even if you are the only shareholder, your Corporation is expected to issue your shares by providing a Stock Certificate that describes the number of shares of stock you own. This issuance should also be reported in the Corporation’s Stock Transfer Ledger.
While LLCs, LPs, and LLPs are not required to follow such steps, it is still recommended that they issue and properly document issuance of Membership or Partnership Certificates to all owners.
Choosing to own Stock Certificates can render you with a safe and secure way to demonstrate your ownership in a business entity, providing benefits to yourself and your employees. Hence, you should go for a professional-looking Stock Certificate that will make you even prouder to be a shareholder.
How can IncParadise help you?
At Inc Paradise, we can help you in getting the Stock Certificates for every member. You can generate the free stock certificate at https://www.freestockcertificate.com/ – Generate with IncParadise. For more information on company formation documents, contact our professionals.