Issued Stock vs. Outstanding Stock: Key Differences

Category Issued Stock Outstanding Stock
Definition Total number of shares a company has ever sold (includes both outstanding shares and treasury stock). Total number of shares held by investors (excludes treasury stock).
Includes Treasury Stock? Yes, includes both shares held by investors and repurchased shares (treasury stock). No, excludes treasury stock since those shares are held by the company itself.
Held by Investors? Not necessarily—some issued shares may be repurchased by the company and held as treasury stock. Yes, outstanding stock consists only of shares that are currently in the hands of investors.
Used to Calculate EPS? No, issued stock is not used for EPS calculations. Yes, outstanding stock is used in EPS (Earnings Per Share) calculations.
Can Change Over Time? Yes, if the company issues new shares or buys back shares. Yes, when companies issue new shares or repurchase shares.

Formula Relationship

Issued Stock = Outstanding Stock + Treasury Stock

Example

Thus:

1,000,000 (Issued Stock) = 800,000 (Outstanding Stock) + 200,000 (Treasury Stock)

Statutory Voting vs. Cumulative Voting

Feature Statutory Voting Cumulative Voting
Definition A shareholder must vote the same number of shares for each board seat available. A shareholder can allocate their total votes freely among one or more candidates.
Formula for Total Votes Shares Owned × Number of Seats Available Shares Owned × Number of Seats Available (same as statutory voting)
Voting Flexibility Less flexible—votes must be split evenly across all candidates. More flexible—votes can be concentrated on one or a few candidates.
Effect on Minority Shareholders Less favorable—majority shareholders have stronger control over the board. More favorable—allows minority shareholders to increase their influence by pooling votes on specific candidates.
Common Use Case More common in large corporations where majority shareholders prefer control. Often used in companies where protecting minority shareholders is a priority.
Example If a shareholder owns 1,000 shares and there are 3 board seats, they can cast 1,000 votes per seat. If a shareholder owns 1,000 shares and there are 3 board seats, they have 3,000 total votes and can distribute them as they wish (e.g., all 3,000 votes to one candidate).

Key Takeaways

Board Elections: Typical Frequency, Board Size, and Candidate Contests

The number of candidates per board seat, the frequency of elections, and board size vary depending on company size and governance practices.

1. Board Elections Frequency

2. Board Size & Number of Candidates per Seat (Large Cap vs. Mid-Market vs. Small Cap)

Company Size Typical Board Size Number of Candidates per Seat Election Frequency
Large-Cap (S&P 500 firms) 9 - 15 directors Usually 1-2 per seat (often unopposed) Annual or staggered (every 3 years for a third of the board)
Mid-Market ($500M - $5B valuation) 7 - 11 directors Usually 1-3 per seat (depends on activist investors) Annual or staggered
Small-Cap (< $500M valuation) 5 - 9 directors 1-5 per seat (sometimes competitive, especially in contested elections) Annual

3. Candidate Contests: How Many People Run for a Seat?

4. Real-World Examples

Large-Cap Example: Apple Inc. (AAPL)

Mid-Market Example: Dick’s Sporting Goods (DKS)

Small-Cap Example: A Startup-turned-Public Company (e.g., Etsy in its early public years)

5. Key Takeaways

  1. Larger companies tend to have fewer candidates per seat (management’s nominees are rarely challenged).
  2. Smaller companies are more likely to see contested board elections.
  3. Board size decreases as company size decreases, with small-cap companies having 5-9 directors and large-cap companies having 9-15 directors.
  4. Elections are usually annual, but staggered boards spread elections over three years.

Major Regulations for the SIE Exam

Regulation Description Regulatory Authority
Regulation T (Reg T) Sets initial margin requirements (typically 50%) for buying securities on credit. Also governs the use of credit in margin accounts. Federal Reserve Board
Regulation U (Reg U) Governs how banks can extend credit for the purchase of margin securities. Federal Reserve Board
Regulation X (Reg X) Requires borrowers (customers) to comply with Reg T and U if they obtain credit from foreign lenders to buy securities. Federal Reserve Board
Regulation D (Reg D) Provides exemptions from SEC registration for private placements of securities under specific conditions (e.g., Rule 506). SEC
Regulation A (Reg A) Allows small and mid-sized companies to raise capital with limited SEC registration (Tier 1 and Tier 2 offerings). SEC
Regulation M (Reg M) Prohibits market manipulation during public offerings (e.g., underwriters cannot bid up prices during the restricted period). SEC
Regulation FD (Reg FD) Promotes full and fair disclosure by requiring public dissemination of material nonpublic information. SEC
Regulation S-P (Reg S-P) Requires firms to protect customers’ personal financial information and provide privacy notices. SEC
Regulation S-ID (Reg S-ID) Requires broker-dealers and investment advisers to implement identity theft prevention programs (“Red Flag Rules”). SEC
Regulation SHO (Reg SHO) Governs short selling and requires firms to locate securities before executing short sales. SEC

Business Entity Comparison with Examples

Feature C-Corporation (C-Corp) S-Corporation (S-Corp) Limited Partnership (LP) Limited Liability Company (LLC)
Legal Entity Separate from owners Separate from owners Separate entity Separate from owners
Taxation Double taxation (corporate + personal) Pass-through to shareholders Pass-through to partners Usually pass-through, or elect corporate
Owners Shareholders ≤ 100 U.S. shareholders At least 1 general & 1+ limited partners Members (no limit)
Liability Protection Yes — for shareholders Yes — for shareholders Limited for limited partners only Yes — for all members
Who Can Own Anyone (including entities/foreigners) Only U.S. individuals & certain trusts Anyone Anyone
Shares Transferable? Yes Restricted Usually restricted Often restricted
Management Board of Directors & Officers Board of Directors & Officers General partner manages Flexible: member or manager-managed
Raising Capital Easiest — public & private funding Limited by shareholder rules Moderate — common in private placements Moderate — depends on structure
Ideal For Large companies, startups, IPOs Small-to-mid-sized U.S. businesses Private equity, real estate, hedge funds Small-to-mid-sized businesses, real estate
Common Examples Apple, Microsoft, JPMorgan Chase Local law firms, medical practices Blackstone Real Estate Income Trust (BREIT), Oil & Gas partnerships Real estate investment LLCs, family businesses
Common Uses / Industries Tech, banking, manufacturing Professional services, small corporations Investment funds, venture capital, real estate Real estate, e-commerce, consulting, services

Key Takeaways

  1. C-Corporations (C-Corps)
    C-Corps are ideal for large companies or startups seeking significant investment or planning to go public (IPO).
    They offer unlimited shareholders, easy transfer of shares, and are attractive to institutional investors — but they come with double taxation (corporate and dividend level).
    Commonly used in tech, finance, and manufacturing industries due to their growth needs and access to capital markets.

  2. S-Corporations (S-Corps)
    S-Corps are suitable for small to mid-sized domestic businesses, like law firms, dental offices, or family businesses, that want pass-through taxation while still enjoying corporate liability protection.
    They are limited to 100 U.S. individual shareholders and cannot be owned by entities, which makes them less flexible for expansion.

  3. Limited Partnerships (LPs)
    LPs are favored by investment funds, real estate syndicates, and oil & gas ventures because they allow general partners to manage and limited partners to invest passively with limited liability.
    This structure supports raising capital without giving up control, and provides pass-through tax treatment.

  4. Limited Liability Companies (LLCs)
    LLCs are highly flexible and provide limited liability with fewer formalities.
    They are popular among real estate investors, consultants, freelancers, and small business owners who want simple tax treatment and management structure, and the ability to choose how they’re taxed.

S-Corp vs. LLC – Key Distinctions and Why It Matters

Factor S-Corporation (S-Corp) Limited Liability Company (LLC)
Taxation Default pass-through; profits/losses pass to shareholders, taxed on personal returns Default pass-through, but can elect to be taxed as a C-Corp or S-Corp (flexible)
Self-Employment Taxes Owners can pay themselves a salary and avoid self-employment tax on remaining profits All profits subject to self-employment tax unless taxed as S-Corp
Ownership Restrictions ≤ 100 U.S. individuals only; no entities, non-resident aliens, or multiple classes of stock No restrictions — members can be individuals, entities, foreigners; multiple ownership classes allowed
Formality Requirements Requires Board of Directors, corporate bylaws, shareholder meetings, minutes Less formal — no board or annual meetings required (unless state requires)
Profit Distribution Must distribute profits strictly based on ownership Can allocate profits unevenly, regardless of ownership %
Flexibility Less flexible — designed to mirror a traditional corporation Highly flexible — ideal for tailoring agreements among owners
Ideal For Businesses that want corporate structure with tax efficiency, or plan to draw salaries Businesses needing flexibility in ownership, management, and profit sharing

Choose an S-Corp if:

Choose an LLC if: