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7 • 2008

What is the difference between authorized shares and issued shares?

The Articles of Incorporation must designate the number of shares of stock that the corporation may issue to shareholders. The shares are issued to shareholders in the corporation’s first minutes. The number of shares actually issued to shareholders are referred to as the “issued” shares of stock. It is good practice for the number of “authorized” shares to substantially exceed the number of shares that have been actually “issued” to shareholders to enable the corporation to engage in future transactions (e.g., issuing shares to a key employee, stock split, etc.)