Penny Stocks- Introduction

Those small publicly traded businesses with share prices of less than $5 and capitalization of less than $50 million are referred to as penny stocks. Penny stocks may trade on any of the major stock exchanges. For investors the risk is generally greater and the chance of instant success is remote at best. To counter this relatively volatile environment an investor can participate for a relatively low investment dollar amount.

To understand this investment environment the reader must first understand the corporate legal structure, the growth cycle of business; the different exchanges and their corresponding rules, and the overall risk scenario. The following sections explain these basic penny stock fundamentals. Read them prior to risking any hard earned money.

Corporate Legal Structure

There are several different legal structures for a business. The most comprehensive legal status is the ability to exist as a corporation. The state of residence grants this privilege to an investment group (can be as little as one individual). The investors own a position (a part) in the business by purchasing shares.

Each year the company must renew its entity status with the state by filing notices of renewal and of course paying a fee. each state is different in their requirements but the essential documentation is as follows:

1) A granted legal name and address
2) Notice of filing agent (person to contact in regard to issues)
3) Board of Directors
4) List of Corporate Officers
5) A journal or resolutions

To financially start and fund growth the company is allowed to sell shares of stock. Initially,

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