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What Type of Corporation are You Forming

Is Your Corporation a Stock Corporation Will the Stock be Publicly Traded

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What Type of Corporation are You Forming? Stock or Non-stock? Publicly Traded or Privately Held?

As you are starting your corporation, you need to make some decisions about what type of corporation you will set up. In particular, one of your first decisions needs to be whether your corporation will sell shares of stock.

A stock corporation issues stock and sells the stock to individuals (or other companies or trusts) to raise money for business start-up or growth. The stock may be issued to only a few individuals (a privately held company) or it may be offered to the public (a publicly held or publicly traded company). A publicly held company can be closely held, by just a few shareholders, or shares can be widely distributed and traded.

Most for-profit corporations are stock corporations, but sometimes a corporation is formed as a non-stock corporation. Non-profit corporations are non-stock corporations, as are corporations formed for a short time for a single purpose.

You will most likely form a stock corporation, and unless you have some reason to raise a lot of money from the general public, you will probably have a private corporation, with the shares being held by only a few individuals.

Just to recap your decisions

  • First, will you sell shares of stock? (stock or non-stock corporation designation)

  • Second, if there will be shares of stock, will the stock be held privately or will it be publicly traded?

  • Third, if the shares are publicly traded, will they be closely held or widely traded?

Your decision about the type of corporation will be part of the information you need to provide on the Articles of Incorporation you will use to apply for corporate status in your state.

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