Buying shares of stock is one of the major forms of investing for individuals and businesses. However, not every business lists shares of stock on an open market. This is true even of incorporated companies, which may file for corporate status to achieve legal protection but never elect to sell stock to the public.
When a company chooses to incorporate, it must file paperwork with the state in which it operates. Each state has its own laws for incorporating, which gives a business special legal status as a person. This shields owners from liability in the event that someone files a lawsuit against the business. However, it does not necessarily mean that the business will begin offering stock to members of the general public.
The only time you have the ability to buy stock in a company whenever you choose is once it has issued stock that is being publicly traded. This is the case with most stock on major exchanges, which brokers buy and sell for their clients during each trading day. Publicly traded stock has a market price that rises and falls based on the prices buyers and sellers agree to. However, many incorporated companies do not have their stock listed for sale on any exchange.
An IPO, or initial public offering, is the process through which an incorporated company lists its stock for sale on an exchange. The process is costly and time-consuming, involving a thorough financial audit and review from regulatory authorities with the federal government and the exchange where the company plans to list its stock. During an IPO, underwriters first offer stock to high value clients. This means that even when an incorporated company begins trading, you may not be able to buy its shares immediately if demand is high.
Some incorporated companies offer individuals other ways to invest or buy shares without listing on public exchanges. For example, small businesses may allow investors to buy shares, or take on ownership, through subscription agreements. Subscription agreements allow investors to become partners in the business. They serve as contracts that specify the level of an investor's financial contribution to the company and the company's obligations to the partner. However, a business that offers subscription agreements can choose to accept or deny partner candidates as its leaders choose. This leaves only publicly traded companies open to investment from anyone.
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