WHAT IS PAID-IN CAPITAL
Corporations may sell shares of stock in order to raise capital.
Most states require new Corporations to specify the number of Authorized Shares of Stock which the Corporation may issue in their Articles of Incorporation.
Corporations may sell some of their stock directly to purchasers.
Stock then may be sold from one purchaser to another through brokers on the open market.
Corporations may also issue stock to employees as a form of compensation.
Most Corporations issue stock with a Par Value.
Par value is usually a small amount, in many cases less than a dollar.
When the Corporation sells stock directly to purchasers, those purchasers usually pay an amount greater than the Par Value.
Paid-in Capital could have two definitions depending on the source.
Paid-in Capital may refer to the difference between the price at which a share of Corporate Stock was sold minus the Par Value of the stock.
Sometimes references to Paid-in Capital include Par Value plus any amount above Par value.
Paid-in Capital does not include retained earnings but only the amount that was received by the company in exchange for ownership shares in the company.
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