Comments on: How many shares should be authorized in the certificate of incorporation?

By: CEO

CEO — Sun, 11 Dec 2011 21:54:46 +0000

Yokum I was wondering if
you could help me answer a question with regard to a percentage allocation for
the employee stock options pool. Do you think typically that is 5%, 10%, 15% or
20%?

We’ve just formed a
Delaware corporation authorized for 10,000,000but just
can’t any information on what % should of that should be allocated for this pool? We're initially doing an convertible debt deal and then a 15% equity deal , with 4 other rounds until a planned IPO.

Thoughts?

By: Pommysagoo

Pommysagoo — Fri, 18 Nov 2011 03:43:21 +0000

Hi Yokum,
I love your blog. I'm hoping you can help me here.

I'm the founder of a medical company. I've just incorporated it and registered it here in Ontario, Canada.

As it is a new firm. I'm trying to raise approximately $850,000 from a private investor(s).

I need to issue a shareholders agreement. Could I start by saying that the firm will commence with 1,000,000 shares?

Here is the share distribution:

46% - P.Sagoo (myself)
15% - K.Sagoo (my son who will handle the Sales & Marketing)
9% - My CTO
15% - Private Investor #1 (investing $425,000)
15% - Private Investor #2 (investing $425,000)

Could you tell me how the share distribution should be in the above instance please?

Thank you

Pommy Sagoo
Email: pommysagoo@me.com

By: Kenneth

Kenneth — Wed, 24 Aug 2011 02:20:56 +0000

I am in the process of taking on the CEO role in a young company. The founder has previously given away about one third of the outstanding stock in the company for various reasons not many which were justified. He has issued all of the authorized stock. My question is what percentage of shareholders vote is required to authorize more stock? Do stock option holders have a vote?

By: Ryan

Ryan — Mon, 04 Jul 2011 02:19:32 +0000

Thanks for your blog. It's terrific. I incorporated a Delaware C corp earlier this year and authorized 10 million shares and issued 6 million shares to myself as the sole founder. The startup (a website) is still in the early development phase but now I've had an unexpected change in plans wherein I intend to add a second co-founder and split the equity with him almost on a equal basis. So I was thinking I would authorize more shares, up to 20 million but perhaps only 17 or 18 million, and issue at least 5.5 million shares to my new co-founder. In the next several months we plan to give another 10% equity to engineers etc. before we raise an equity round of financing. In this situation should I authorize another 10 million shares so that I have 20 million total, or is 20 million too many at this early stage before we've launched or raised any money?

By: Bhotchkiss

Bhotchkiss — Sun, 20 Feb 2011 10:44:04 +0000

Yokum, I have read through your responses to other questions and thought I would seek a bit of friendly advise as well. I am in the process of forming an internet company, which I am putting in all my own start up capital (spprox $50,000-$100,000). I have no intensions of bringing in any investors or vulture funds. I was thiking about forming a Deleware Corporation, then issuing myself/trust owned by me all the stock (estimating 20,000,000 shares). My goals are to incentivise employess/independent contractors through some stock “gifts” based on their contributions. My five year plan is to sell a large amount of stock or possible sell the whole company. Based on the above overview of my plan does does 10MM shares of stock sound like a reasonable amount of shares? I realize that 10MM shares maybe somewhat delutive to each share, but I want to be able to keep offering stock “gifts” in addition to financial compensation to my employees as they hit certain sales benchmarks. This way I can offer 100 shares at the end of every month to all 5 of my employees and not significantly dilute my ownership in the Corporation. As this company is being started from my vision and my bank account I would like to make sure I do not give up more that 75% of the company to my employees.
Thank you in advance for any advise you can offer Yokum.
Best wishes,
B

By: Nycdays300

Nycdays300 — Thu, 20 Jan 2011 05:52:44 +0000

Yokum we’ve incorporated our company in Delaware and will be issuing shares soon to investors. We’re basically doing 100k rounds to Angels which equate to 1% of the company to raise a total of 1.2 million therefore giving away 12% of the company. The question we have are:

1) What do we need to do to issue the shares. Do we just get the share certificates from a company like Corpkit and then issue them?
2) Do we need to register these shares anywhere? (SEC or private body)
3) What type of agreement/contract do we need to create?
4) At what point can the client sell the shares in a private company?
5) What other things do we need to consider?

Thanks Yokum excellent website and blog!

By: deevy

deevy — Sun, 16 Jan 2011 04:40:18 +0000

Hello Yokum,

I was wondering, if I start a c corp in Delaware and authorize 9M shares @ .01 per share, how do I actually become owner of the shares? Do I own all issued shares as founder and CEO or do I have to purchase each of them in much of the same way an investor would? Also I would like to know if I could reward them as bonuses to myself, if so, are there limitations to the bonus amount of shares issued to a CEO yearly?

By: Nisa Malone

Nisa Malone — Fri, 17 Dec 2010 07:50:50 +0000

Where do I got to get shares authorized in California?

By: Yokum

Yokum — Thu, 09 Dec 2010 11:26:37 +0000

@NYCdays

1. Doesn't matter. That's just math. I typically suggest 9M.

2. You can't.

3. You should express equity as an exact share number, not a percentage.

4. Startups typically don't authorize preferred stock.

5. You can issue stock anytime.

By: Nycdays300

Nycdays300 — Thu, 02 Dec 2010 10:11:23 +0000

I have just formed my new company last month in October in Delaware as a C corporation and I am in the process of getting funding through a private placement or Angels investors we plan on an IPO in our 5th year.

When I issue equity to the investing parties I want to make sure I cover myself where I am protected in terms of ownership and for the future. I have a few quick questions regarding issuing equity and wanted If I could get your opinion.

1) My company has authorized 10,000,000 shares. How much shall I issue to the founders like myself and the initial directors? I was thinking initially about 6 million or do you think 9 million (but don’t want to pay too much Franchise tax to Delaware)

2) I want to make sure my portion is not diluted out also, how can I ensure this?

3) I’m hiring a CFO soon should I give him shares or a percentage of the company?

4) How shall I split that between preferred and common?

5) After incorporation is there a deadline when I have to issue the shares? Can I wait until Jan 2011 (2 months after incorporation)

Thanks Yokum great site!