Forums: Discussions for entrepreneurs and small business.

Most honored and respected Starters,

I would very much like to file the COI myself!!

• I will be incorporating in DE
• I will be seeking outside capital, in a year or so
• I will eventually need a lot of outside capital (> M30)
• Yes, I have seed money to hire a good law firm

One blogger who I respect, Ryan Roberts, www.thestartuplawyer.com advises to start with 10,000,000 shares of common stock at a very low par value. Most other sources that I read talk about much, much lower numbers.

I am inclined to START IT UP with 10,000,000 shares, par value $0.0001, and then issue 5 to 7 million to myself.

Why do so many people argue for such low numbers?

What problems do high numbers cause?

Will future investors frown on this? (yeah, I know I can change it with my attorneys, but will they frown on it?)

Are there major disadvantages to to the Assumed Par Value Capital method of tax figuring, or what?

The DE Division of Corporations' franchise tax estimator spreadsheet shows that 10,000,000 shares authorized, and 8,000,000 issued (par value $0.0001) and gross assets of $50,000 would have a tax of $75, the minimum.

Hmm, seems ok. I can see the use of having a lot of shares.

Any input would be appreciated!

Hello,

The number of shares that you authorize and issue is almost meaningless, especially when you are first starting out.  The value of your corporation will be based upon expected revenue/profitability, not the number of outstanding shares or the par value.  You can always authorize and issue more shares at a later date, if necessary.

My advice is to issue 100 shares at a par value of $1, so it only costs you $100.

Then focus all of your energy on developing a great business.

Hope that helps.

Good Luck.