Authorized Shares

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What It Means

Authorized Shares refers to the maximum number of shares a company is permitted to issue per the company’s articles of incorporation.

Why It’s Important

A company may decide to reserve some stock as unissued shares, which are authorized but have never been issued. These unissued shares are a useful tool for a company to raise funds without having to amend its articles to increase the number of Authorized Shares. However, issuing new shares has the consequence of Diluting the ownership share of existing stockholders. For this reason, it’s important to understand the number of authorized and issued shares in a company’s capital structure.

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