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Simple English definitions for legal terms
stated capital
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A quick definition of stated capital:
Stated capital is the amount of money that a company has raised by selling its shares of stock. It is also known as legal capital and is usually equal to the total value of the company's outstanding shares. Some states require companies to keep this amount of money in the company to protect creditors. Stated capital is an important measure of a company's financial health and appears on its balance sheet.
A more thorough explanation:
Stated capital is the total amount of money that a company receives from selling its stocks. It is also known as legal capital because it is the minimum amount of money that a company is required to have by law. This money is used to protect the company's creditors in case the company goes bankrupt.
For example, if a company sells 100 shares of stock for $10 each, the stated capital would be $1,000 (100 shares x $10 per share). This money is recorded on the company's balance sheet as equity.
Stated capital is important because it shows how much money a company has raised from selling its stocks. It also helps to protect the company's creditors by ensuring that the company has enough money to pay its debts if it goes bankrupt.