Financing the Corporation. Business financing. Securities, shares, bonds.

After incorporation, the corporation must obtain the funds necessary to launch the business operations. After business operation started, more financial alternative available, such as retained earnings, short term borrowing. At the beginning, less financing options exist.

The main method of initially financing a corporation is by issue of securities. The board of directors authorizes the issue of securities at organizational meeting. Securities are sold to investors. The common types of securities are equity security and debt securities. Equity securities are also called share of capital stock of shares. Each share represents an interest in the ownership of the corporation. People who own the shares (shareholders or stockholders) are the owners of the corporation.

Debt securities are also called bonds. Bonds owners do not own the corporation, just gave them a loan. The investors who purchased bonds of a corporation are called creditors. The corporation which issues bonds is debtor.

The corporation which issues the securities has to meet certain financial requirements, prepare detailed report about its financial status, and has to comply with security law. The securities  must registered with the state agency. The information must be given to the federal agency - Securities and Exchange Commission and to the person to whom the securities are offered for sale. The function of state and federal securities laws is to protect the public investors.