Stock is an type of equity investment, which means you become an owner of the company along will all the other shareholders. Documentation of your stock ownership can take different forms depending on how you purchased your shares of stock. Common forms of ownership documentation include a physical stock certificate or an account statement from your broker if you elect to have your stock held in street name through a brokerage. Some companies offer direct registration of your stock and issue a statement of ownership rather than stock certificates.
Companies that allow direct registration record your stock ownership directly on the company's books. Instead of sending you a stock certificate detailing the number of shares you own, the company or its registrar or transfer agent sends you a statement of ownership. You still maintain all your ownership benefits and prerogatives, such as the right to attend and vote at the annual shareholders' meeting. The company's registrar or transfer agent will also keep you updated on the status of your stock ownership by sending you regular account statements and annual reports. Your dividends will be sent to you or reinvested in additional shares of company stock, depending on how you previously elected to receive them.
One of the primary advantages of having your stock registered directly with the issuer is the security of your investment. You don't have to worry about safeguarding your stock certificates, because there aren't any. The company registrar communicates with you directly any time the company issues a quarterly dividend or annual report. When you get ready to sell your stock, you can tell your broker to move the stock electronically without the need of filling out a lot of complicated forms.
When you sell your stock you will have a taxable event, which may be a capital gain or a capital loss. You'll need to know your cost basis for each share of stock you sold to figure your taxes. Tracking the cost basis of your stocks can be challenging, particularly if you accumulated shares of the same stock at different times and at different prices. When you have direct registration of your stocks you will receive periodic updates to your statement of ownership, which include a record of your cost basis for any additional shares that you have accumulated. This information will be quite helpful when you get ready to file your income tax return.
Your statement of ownership, along with any periodic updates you receive from the issuer, details how many shares of company stock you own. There are a variety of ways to sell stock that is held by direct registration. You can contact the company registrar and request a physical stock certificate, which you may then sell through your investments broker. However, it is easier simply to authorize your investments broker to electronically move your shares to your brokerage account, then put in a sell order. Some companies will sell your stock for you, although in most cases the sale is made on a set schedule and you will not be able to set the time or a minimum price.