What Are Stock Certificates?

What Are Stock Certificates?

In Washington, a corporation is formed by filing “Articles of Incorporation” with the Secretary of State and paying the applicable fee. See generally RCW 23B.020.030. The Articles of Incorporation contain information regarding the fundamental structure of the corporation, including the number of shares the corporation is authorized to issue. Id. A share of stock is a fractional share of ownership in a business. A corporation may have one or more class or series of shares designated in its Articles of Incorporation. Id.

Under Washington law, shares of stock may, but need not be, represented by stock certificates, unless the Articles of Incorporation or Bylaws require stock certificates. See RCW 23B.06.250 and RCW 23B.06.260Stock certificates generally specify: the name of the corporation, the name of the stockholder, the number and class of shares issued, and any limitations on the transferability of the stock. Id. Those who hold the Stock Certificates own an interest in the company.

Another form of stock ownership is on the “books” or records of the company. This is the default method of accounting for stock, unless the Articles of Incorporation or Bylaws of the company require otherwise. See RCW 26B.06.260. The method of record keeping for stock ownership (i.e. stock certificates or on the “books”) is an important decision in corporate governance.

Issuance of stock certificates can be cumbersome, because the corporation has to keep record of all stock certificates issued until the shares represented by the certificates are reacquired, redeemed, converted, or cancelled. This process is complicated when a stockholder loses or destroys his or her stock certificate. If the corporation does not issue stock certificates, Washington law simply requires the corporation to furnish the shareholder with a record containing specific information regarding his or her shares of stock. See RCW 23B.06.260.

Forming and maintaining a corporation is challenging. A Spokane business attorney can streamline and simplify the process of corporate formation and recordkeeping. Wolff, Hislop & Crockett prides itself on being a trusted legal resource for businesses in the Spokane, Spokane Valley, and Liberty Lake areas and beyond. Contact us today for a consultation.

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