Paid in surplus refers to the amount of money that shareholders have paid for their corporate stock above its stated value. This surplus arises when the price paid for shares exceeds the nominal or par value assigned to those shares. Essentially, it represents the additional capital that shareholders contribute to the company beyond the minimum required amount.
This term is primarily used in corporate law, particularly in the context of corporate finance and capital structure. Paid in surplus is relevant when companies issue stock and need to account for the capital raised from shareholders. It may also be involved in legal matters concerning corporate governance, shareholder rights, and financial reporting. Users can manage related forms and procedures through resources like US Legal Forms, which provide templates for corporate filings and compliance documentation.
Here are a couple of examples of abatement:
For instance, if a corporation issues shares with a par value of $1 each but sells them for $5 each, the paid in surplus would be $4 per share. If a shareholder purchases 100 shares, their total paid in surplus would amount to $400.
(Hypothetical example) A startup company issues shares with a stated value of $0.50 each and sells them for $2.00 each. The paid in surplus created would be $1.50 for each share sold, contributing significantly to the company's capital.
Examples of state differences (not exhaustive):
| State | Paid in Surplus Regulations |
|---|---|
| California | Requires detailed disclosures of paid in surplus in corporate financial statements. |
| Delaware | Allows flexibility in how surplus is reported, often favoring corporate discretion. |
| New York | Mandates specific accounting practices for reporting paid in surplus. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Paid-up capital | The total amount of money shareholders have paid for their shares. | Paid in surplus is the excess over the stated value, while paid-up capital includes all paid amounts. |
| Stated value | The nominal value assigned to a share of stock. | Paid in surplus is the amount above this stated value. |
If you are involved in a corporation and need to understand how paid in surplus affects your financial reporting or shareholder agreements, consider the following steps:
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Paid in surplus is the amount paid above the stated value of shares, while paid-up capital includes all amounts paid for shares.