What is the difference between stated capital and paid up capital?

What is the difference between stated capital and paid up capital?

The corporation’s stated capital serves as the basis for computing the paid up capital of its shares. And, like stated capital, PUC is an attribute of each issued corporate share. But PUC may deviate from stated capital. Stated capital is a corporate-law concept; paid up capital is a tax-law concept.

What is included in the legal capital?

Legal capital is that amount of a company’s equity that cannot legally be allowed to leave the business; it cannot be distributed through a dividend or any other means. It is the par value of common stock and the stated value of the preferred stock that a business has sold or otherwise issued to investors.

What is legal capital and how is it measured?

How to Calculate Legal Capital? The value of the legal capital of the Firm is the cumulative amount of the par value of all of its stocks. Hence, if a firm has a par value of $10 with a total of 10,000 shares outstanding, its legal capital would be $100,000.

How do you calculate stated capital?

While stated capital is a cumulative amount calculated in relation to a class or series of shares, the value of PUC must be determined for a particular share. The PUC of a share of a particular class is calculated by dividing the PUC for the particular class by the number of issued shares in the class.

What is minimum paid capital?

Paid-up Share Capital With the Companies Amendment Act 2015, there is no minimum requirement of paid-up capital of the Company. That means now Company can be formed with even Rs. 1,000 as paid-up capital.

Is paid up capital an asset?

Paid-up capital is listed under the stockholder’s equity on the balance sheet. 2 This category is further subdivided into the common stock and additional paid-up capital sub-accounts. The price of a share of stock is comprised of two parts: the par value and the additional premium paid that is above the par value.

How much is the legal capital?

The amount of the legal capital of the corporation is the aggregate amount of the par value of all of its shares. So if a corporation has 10 shares outstanding with a par value of $1 each, its legal capital would be $10.

What is minimum legal capital?

Definition: Minimum legal capital is the amount of assets that shareholders are required to contribute to a corporation by law. In other words, many states have laws that require shareholders to invest a minimum amount of assets in the company at all times.

What is paid in capital?

Paid-in capital is the full amount of cash or other assets that shareholders have given a company in exchange for stock, par value plus any amount paid in excess. Paid-in capital is reported in the shareholders’ equity section of the balance sheet.

What is capital formula?

The working capital formula measures the short-term financial health of a business. This is the working capital calculation: Working capital = current assets – current liabilities.

What’s the difference between legal capital and stated capital?

Capital that by law or resolution must remain within a firm and that is restricted for purposes of dividends or other distributions. Legal capital is generally equal to the par or stated value of all outstanding stock. Also called stated capital. Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investor by David L. Scott.

How does the stated capital of a company work?

Therefore, all shares in the class or series have the same per share stated capital amount. Stated capital can be increased or decreased by various transactions in which the corporation redeems or purchases its own shares.

What is the par value of legal capital?

The par value of all of a company’s shares outstanding. Legal capital may not be distributed as dividends, or as anything else. It is also called stated capital.

How much legal capital do you need in a state?

States that have adopted these provisions have eliminated the distinction between par value and the amount contributed in excess of par. Therefore, many states require legal capital in the amount of the total proceeds received from the issuance of stock. In this example, legal capital would equal $50,000.