Article: Issuing stock is one of the two basic ways to raise funding to grow your business. If your business is new, or is growing, capital is necessary, and issuing stock involves selling pieces of ownership in your business to investors in exchange for cash.  Issuing shares involves determining how much capital you need, and then determining an appropriate amount of shares to issue in order to raise that capital. If you need $5,000 initially for example, and decide to issue five shares to yourself, each share would be worth $1,000 each. Since you own five out of five shares, you would own 100% of the business. This would involve adding $5,000 of your own cash into your business, since you must pay for the shares. If you need another $5,000 later on, and you choose to issue an additional five shares to other investors (like family, for example) for $1,000 each again, you would see your ownership drop to 50%. This is because there are 10 shares outstanding now (five of yours, and five belonging to other investors), bringing your ownership down from 100% to 50%. Other than issuing stock, the other way to finance your business is by relying on debt. Issuing stock has several advantages as an option, and may be appropriate for your business.  Firstly, if you are a new business, or a business with a poor credit rating, acquiring debt may be too costly or impractical. Lenders often charge higher interest rates to businesses with little or poor credit. Issuing stock leaves you with more cash available compared to debt financing. When you take out a loan, you will need to not only use up your cash flow to repay the principal, but you will also be required to pay interest. This eats out of your profits each month. Acquiring more debt makes your business appear risky. Investors look at how much of your assets are owned by shareholders, and how much is owned by lenders. The higher the proportion owned by lenders, the more risky your company is deemed to be by both future investors and future lenders. If your business fails, your assets will need to go to pay back the loans outstanding before shareholders receive their share. Issuing stock means giving up a piece of your ownership in the business (also known as diluting your ownership), which also means sharing your profits, sharing decision making, and sharing in all future growth of the company.  In addition, if you ever want your ownership back, you will need to buy out the other shareholders, which may cost much more than the money that was initially raised by them. The more shares you issue, the smaller your ownership is in the business. This means you may have less say over the future course of the business. Using debt can also have advantages to your business. When you use debt, you do not dilute your ownership in the business at all, and the lender has no control or say over what you do with your business. You can also easily plan for loan payments because they do not fluctuate.  Another benefit to using debt is that interest payments are tax deductible, which can reduce your overall tax bill. In addition, once the debt is paid off, you get to keep all the profits that will be made from the loaned money, whereas with issuing stock it would need to be shared with shareholders. Issuing debt is a good idea if you have good credit rating, and a profitable and stable business.

What is a summary?
Familiarize yourself with the basics of issuing stock. Review the benefits of issuing stock. Examine the disadvantages of issuing stock. Consider alternatives to issuing stock.