Paid-Up Capital

You own a company that makes high-end trapeze equipment. You want to raise money so you can expand into the high-wire sector. You decide the best way to raise cash for the expansion will be to sell stock directly to investors.

So you are going to sell the investors some stock. They will receive shares as part of the deal. What do you receive? Paid-up capital.

The term refers to the amount of cash that comes into a firm from a sale of stock. The concept only applies when the company sell stock in the primary market. If you buy shares on the stock market (meaning you’ve purchased them from a shareholder and not from the company), that money does not count as paid-up capital. The company doesn’t receive that cash. The other investor does, because the stock was purchased on the secondary market.