Section 6

Shares of Stock

A Nevada corporation can issue common or preferred stock - voting or nonvoting, with or without par value.

Preferred shareholders usually do not have voting rights, but normally have priority rights over common shareholders. The preferred shareholder, however, does not have control over management's actions because the shareholder does not have voting power. First dividends are paid to preferred shareholders up to a preset limit (i.e. six percent of the gross income paid out on dividends). Over this amount, all dividends are paid to common shareholders.

Common stock is the ordinary stock and controls management's actions. Common shareholders are entitled to one vote per share of stock held. If there are no preferred shareholders, all dividends are paid to the common shareholders. Most new corporations probably will want to issue only one class of common stock, if all investors are generally on an equal basis. Preferred shares can be issued at a later date, if it becomes desirable.

A par value can be assigned to common stock. At one time, par value stock was normally used, but today it has little significance. It does not represent the actual value of the corporation. The value of the corporation fluctuates all the time, depending on the amount of assets, liabilities, goodwill, and prosperity. All these factors and more must be taken into account to determine the true value of each share. Today, most newly formed corporations issue no par value common stock.

When issuing stock, it is best not to issue all of the authorized shares, so that the unissued shares can be used in the future without paying additional filing fees. A shareholder who wants to retain control of the corporation can do so without issuing all of the authorized shares. If issuing a greater number of shares is necessary, it can be done easily at any time.

The director(s) can determine the value of services rendered in lieu of stock. Under Nevada corporate law, no minimum capital is required by the corporation.


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