Authorized capital stock refers to the maximum number of shares of common and preferred stock that a corporation is legally permitted to issue according to its corporate charter or articles of incorporation. This upper limit is established when the company is initially formed or subsequently amended through formal shareholder votes and board approvals. A corporation cannot issue shares exceeding this authorized ceiling without undergoing an official legal process to increase the authorized limit. The portion of authorized stock that is actually sold to investors is designated as issued and outstanding stock.