Big corporations are very powerful entities that can possess more capital than some countries in the world. However, every company begins as a small start-up business. These businesses grow with the injections of capital, both from the founders and from other investors.A company’s plans become so big that it needs public financing to support future development, and so they sell stock to raise the cash needed to grow.

A state issues articles of incorporation to the firm that legally recognizes the status of the corporation as an independent entity. The certificate of incorporation identifies the name, address, and the field of operation of a new corporation and describes the stocks to be issued. It is a long process that starts with the evaluation of the company to understand the price per share a public investor would be willing to pay.

There are few ways of issuing Shares are;

A) Basic Issuance

B) Issuance by Subscription

C) Issuance with Other Securities

A) Basic Issuance:Basic issuance is selling to the public an agreed amount of stocks and receiving cash per each of the stocks being sold. Shares constitute the company’s shared capital, which is shown under equity in accounting. Cash received from the sale of shares is an asset account.

Debit Credit

Cash Number of shares issued * share price

Share Capital   Number of shares issued * share price

B) Issuance by Subscription: Issuance by subscription is the case of selling shares on ‘loan’, where investors do not have to pay the full amount at once. However, paying a part of the amount gives the investor a subscription status. This investor cannot enjoy the rights, and the shares are not officially counted and recorded as issued until the full amount is paid.

  First, record the subscribed shares and the receivables the company is expecting to get. As per accounting rules, receivable is an asset account which increases by debit.

Then record the ‘down payment’- the cash that the company is getting initially. This amount we have to subtract from the expected receivables, since it is already being paid.

When the deadline of the payment comes, the full amount is paid and shares are recorder as shared capital.

C) Issuance with Other Securities:Issuance with other securities means issuing two classes of shares at the same time. Two classes usually include preferred and common classes of shares. Common shares are the traditional shares that give ownership part to the owners supported by voting rights. Preferred Shares are sometimes are called the mix of equity and debt because the preferred stakeholders usually do not have voting rights and do not participate in the company management.In the case of company’s bankruptcy and default, preferred stakeholders must be paid before common stakeholders and after the debt holders. This seniority is held in the distribution of dividends as well.

Paying Dividends

Dividends are the payment the investors gain in return for their investment. Dividends can be paid monthly, quarterly, or semi-annually depending on the company’s dividend payout policy. Companies are not liable to pay out the dividends until they declares the dividends. This means in bad years, many companies simply do not declare dividends, instead building up cash reserves.Companies usually have an incentive to pay dividends, since it is a good sign of the company’s financial position that helps to raise the share price overall.Most companies, dividends are paid on a regular basis. When the company declares the dividends, they become a liability for the company, and are located under dividends payable account.

Income investors looking for add dividend stocks to their portfolios can find plenty of attractive opportunities in Europe.Unlike U.S. companies European firms have traditionally paid out a large portion of their earnings to shareholders in dividends. While American stocks pay dividends quarterly most European stocks generally pay dividends only twice a year – an interim and a final dividend. It is incorrect to assume that simply because European companies pay dividends only twice a year they are worse than American companies. In fact, exactly the opposite is true. Not only most European firms have higher payout but also have higher dividend yields than their American peers.American companies used to have a strong dividend culture many decades ago when they rewarded shareholders with high and consistent dividends. Investors at that time invested in equities more for earning periodic income as opposed to price appreciation.

European companies usually pay dividends once per year, whereas American companies tend to pay it quarterly. Those wanting to collect a total yield would have to hold the stock for all four quarters if they are holding American stocks, whereas they would have to hold a stock for much longer to get yearly yields in European stocks.European stocks tend to pay higher dividends in average, but at the same time, they also tend to cut their dividend rates faster when the economy slows down.