What does Capitalization Mean?
Capitalization is a term that requires a knowledge of accounting to understand, and can have different meanings. With a new corporation, the term generally refers to the amount of money that a corporation has in its “kitty” when operations begin. Some states have minimum capitalization requirements to insure that corporations have a bare minimum of assets before starting operations. Since shareholders are somewhat insulated from lawsuits against a corporation, these assets provide a means to pay any potential lawsuit winners. Minimum capitalization requirements also make it a little more difficult to start a corporation, and was probably started to help to keep out the “riff raff ” Today, only a few states have minimum capitalization requirements.
