Final answer:
The minimum legal capital of a corporation is the par or stated value of the issued shares, representing the initial capital invested by shareholders to establish the company. Shares sold publicly for the first time during an IPO allow the corporation to raise financial capital. Subsequent transactions between shareholders do not affect the firm's capital, but shareholders earn through dividends and capital gains.
Step-by-step explanation:
A corporation's minimum legal capital is defined as the least amount of capital that must be invested by the shareholders to start the business. This value is typically determined by the par or stated value of the number of shares issued. Par value is the nominal face value of a share of stock, and when shares are sold, the corporation records the par or stated value in its accounting as its initial capital. In contrast, stated value is assigned to no-par value stock and is an amount analogous to par value, decided by the board of directors of the corporation.
When a corporation issues stocks, those who buy the stock become the firm's owners, known as shareholders. The sale of stocks allows corporations to raise financial capital, which can finance their operations or investments. The primary stock sale to the public is called the initial public offering (IPO), a crucial event for acquiring capital. Nevertheless, subsequent sale of stock from one investor to another does not inject new capital into the firm. Returns to shareholders come in the form of dividends and capital gains.