Give employee stock owners proof of ownership: Stock Certificate
What we’ll cover
What is a Stock Certificate?
A Stock Certificate serves as physical proof that the certificate holder owns shares in a company. However, it is important to note that Stock Certificates are not the stock itself, but merely tangible evidence of ownership of the shares.
Stock holdings are usually tracked with digital technologies, but you are still required to issue a paper share Stock Certificate (sometimes referred to as a Share Certificate or Stock Ownership Certificate) if your investor requests it. As a practical matter, most corporations are required to issue certificates upon demand, and most issue certificates as a general rule.
This document will be useful to print Stock Certificates, which may be issued initially by the corporation to its original stockholders or provided to new owners who have purchased their shares from a prior stockholder. Get started on yours now – it’s as simple as answering a few questions!
When to use a Stock Certificate:
- You want to give a stockholder proof of purchase of stock.
- You want to give new stockholders evidence of their ownership of stock shares that were issued by a newly formed corporation.
- You want to give a stockholder evidence of ownership of stock shares that were transferred to the stockholder from a former stockholder.
Sample Stock Certificate
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The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws. The shares represented by this certificate may not be transferred, sold, or assigned unless so registered, or unless an exemption from such registration is available. Transfer of the shares represented by this certificate is subject to the restrictions in the corporation's bylaws and the Texas Business Organizations Code.
Certificate Number:
Shares:
INCORPORATED UNDER THE LAWS OF THE STATE OF COMMONWEALTH OF
This certifies that and , as joint tenants with rights of survivorship, , as tenants in common, , as community property, owns shares of own shares of no par value par value common preferred stock in , a corporation, an corporation, transferable only on the books of the corporation by the holder of this certificate in person, or by authorized agent, upon surrender of this certificate, properly endorsed.
In witness of the above, the corporation has caused this certificate to be signed by its President, , and Secretary, , and to be sealed with the seal of the corporation on .
| By: | Date: |
, President
| By: | Date: |
, Secretary
______________________________________________________________________________
Transfer Section
For value received, I, , we, and transfer to _______________________ the shares represented by this certificate, and instruct the corporate Secretary to record this transfer on the books of the corporation. Transfer restrictions, if any, are shown above.
Dated this _____ day of ____________, _______.
_______________________________
Stock Certificate Checklist
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___Sign this document. This document needs to be signed by:
The Stock Certificate can be signed online. It becomes effective as of the date specified in the Stock Certificate.
___Store and share your copy. The stockholder(s) named in the document should receive one copy of the signed Stock Certificate. If you sign this document online a copy will be securely stored in your account. You can share your document from your account.
Important Details
The details of the Stock Certificate should be recorded in the corporate "stock transfer ledger."
After the Stock Certificate is signed (and sealed), the certificate should be delivered to the named owner(s).
The transfer section on the bottom of the Stock Certificate should not be used at this time. It is available for use when the stock is sold or transferred by the stockholder(s).
About Stock Certificates
Learn about how to give employee stock owners proof of ownership
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What are the common terms in a Stock Certificate?
A Stock Certificate, a document serving as tangible evidence of ownership in a corporation, encompasses several essential terms crucial for understanding one's stake in the company. Here are some of the common terms you may come across when looking into making your own Stock Certificate for your shareholders:
Authorized shares
The total number of shares "issued" to persons by a corporation cannot exceed the number of shares "authorized" by the Articles of Incorporation. "Authorized shares" refers to the total number of shares that can be sold ("issued"), either upon formation or at a later time. With the number of authorized shares being the maximum, you should decide how many shares to issue to each stockholder. The number of shares issued only needs to be large enough to reflect the desired percentage ownership of the owners – in other words, it is typical not to issue all of the authorized shares.
Classes of stock
Corporations may generally authorize more than one class of stock, such as "common" stock and "preferred" stock, each with different rights and privileges regarding such things as voting and the payment of dividends. However, most simple corporations authorize only one class of stock: common. If the corporation will offer more than one type of stock, it is strongly recommended that you consult with an attorney prior to creating the class of stock.
Corporate seal
The Articles of Incorporation or Corporate Bylaws may specify whether the corporation will have a "corporate seal." Many new corporations choose not to have a corporate seal in order to avoid the requirement that such a seal imprint all official corporate documents. For example, the seal can be misplaced or stolen, or it may be inconvenient to obtain when it is needed. If the corporation has a corporate seal, it must be imprinted on the Stock Certificate beneath the officers' signatures.
Fractional shares
It is permissible, but not recommended, to issue fractional shares. For example, if Bob, Ted, and Sarah intend to own the corporation in equal shares, it is permissible to issue 33-1/3 shares to each of them. However, if the corporation has authorized 1,000 shares, it is easier to issue, for example, 100 shares to each of them. Each will own 1/3 of the corporation because each owns 1/3 of the 300 issued shares, the remaining 700 shares are held by the corporation.
Number of shares
The number of shares that are issued to each person should be authorized in advance by a corporate resolution. The resolution should specify who will receive the shares and what the corporation will receive in return, such as cash, property, or past services.
Stock transfer ledger
The corporate secretary is responsible for maintaining a current record of the stockholders. The record is often called a "stock transfer ledger." The ledger includes the name and address of each stockholder, the date and number of new shares issued, and the certificate numbers. If any of the certificates are later transferred to other owners, that information is also recorded, showing the new certificate number and the owner for each transferred certificate.
Transfer of shares
If a current stockholder is transferring their shares to another stockholder (in contrast to new shares issued by the corporation), the lower portion of the Stock Certificate ("Transfer section") should be completed by the selling stockholder. When the new owner's name is inserted and the transfer is dated and signed, the certificate should be returned to the corporate secretary, who will issue a new certificate and record the transfer in the corporate stock transfer ledger.
In other words, it is not appropriate for the new owner to simply retain the (old) assigned certificate. Instead, the corporation should issue a new certificate. It would also be inappropriate for the corporation to reuse the former certificate number – rather, each time that a certificate is prepared, the next sequential number should be used.
Still have questions? Do not hesitate to ask a Legal Pro.
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Can I issue a Stock Certificate to a Joint Title?
Yes, title to stock can be owned jointly with another person. There are several ways to own shares jointly:
- Joint tenants (with rights of survivorship): When one joint owner dies, the surviving joint tenant automatically owns the deceased owner's interest.
- Tenants in common: When one owner dies, their interest in the property goes to whomever they designate in their Will.
- Community property: Nine states have community property laws that affect ownership of property between spouses.
Joint tenancy can be a valuable tool for avoiding probate in small estates, particularly if the joint tenancy is between spouses. However, it can cause unintended results if the joint tenancy is between a parent and child (or other third party). Furthermore, joint tenancy can cause serious tax planning problems for spouses whose combined estate exceeds the exemption level for federal estate taxes.
If two or more people own property as "tenants in common," each joint owner owns an equal share in the property. When the first owner dies, the surviving owner does not automatically become the owner of the entire property, as is the case when property is owned in joint tenancy. Instead, the share of the deceased owner passes to whomever is designated in their Will.
It is unusual for two persons to take title to stock as tenants in common because it is easy (and preferable) to merely issue the corresponding number of shares to each of them in their individual names.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and, to a limited extent, Wisconsin have community property laws that affect ownership of property between spouses.
Community property generally refers to property acquired by either spouse during the marriage, except property that is received as a gift or inheritance. The community ownership rule applies even though the property may be titled in only one name. If stock is purchased by a husband and wife using community property (earnings by either spouse during the marriage), it is often preferable to title the stock as community property. This is because there is an income tax benefit gained when one of the spouses dies owning stock that has appreciated in value while that spouse owned it. If this advantage may be important to you, you should consult a Legal Pro or tax advisor.
Stock Certificate FAQs
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How do I make a Stock Certificate?
Making a free Stock Certificate online is simple. Just answer a few questions, and Rocket Lawyer will build your document for you. Consider these questions beforehand to make the process speedier:
- Does the stock have a par value?
- What type of stock will be issued?
- What is the Stock Certificate number?
- Is the stock subject to transfer restrictions?
If you don't have all of the details you need, you can skip questions and save your document for later.
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Are Stock Certificates worth anything?
It depends on whether the company still exists. If the company does exist, the next step would be to contact the transfer agent, who can inform you of any changes in corporate ownership. If the company no longer exists, the certificate will most likely not be worth anything.
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Can I still buy paper Stock Certificates nowadays?
Nowadays, many companies issue shares electronically. However, you can get paper certificates if the corporation offers them. Contact your broker or a transfer agent to determine if paper Stock Certificates can be bought.
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Can I sell or transfer shares without a Stock Certificate?
Yes, shares can be sold or transferred electronically without a physical Stock Certificate. However, some buyers or transfer agents may require a Stock Certificate for certain transactions.
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What do I do if I lose my Stock Certificate?
If you lose your Stock Certificate, you should notify the company's transfer agent or registrar immediately. You may need to complete an Affidavit of Lost Certificate and pay a fee to obtain a replacement certificate.
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