Forums: Discussions for entrepreneurs and small business.

.....is typical upon incorporation?

I just started an online business on June 1st. It is in the scrapbooking/
craft industry. The web site has a forum/gallery and online shop. For
scrapbooking web sites there is another site that keeps track of how
much traffic your site is bringing. The day I opened I was number 3,000
and in just 3 short weeks I`m at 600, the goal is to work my way to the
number 1 spot! So its really taking off!
I have most of my business plan done, (I`ve been working with a business
coach). The plan is to open a brick & mortar store that is connected to the
online community. Then after that, branch out to open several more and
eventually go public. The current shares that will be made available will
be to raise the capital needed.
I have trademarked the name and now I`m ready to incorporate-
this is where I`m finding little on the subject of how many shares do I
start with? I have asked several people and get all kinds of answers.
My coach tells me a minimum of 2 million shares-
A family member who has had an incorporated company told me 1
hundred thousand
and then when I spoke to a corporate attorney he told me that most of his
clients incorporate with 10 thousand!
A major difference in each advice!!

I have googled the subject with no help- I even called ernst & young to
ask what their new clients typically start with, but have not received a call
back-

does anyone know what is a good number?, Is over 2 million good? Will
investors look at a number of shares that are too high or too low and
think I might not be a good investment?

any advice is appreciated!





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You can discover more about a person in an hour of play than in a year of conversation.        ~Plato

BonBon,
Your attorney is correct. 10 thousand or 15 thousand is the norm, if you are starting a new Corporation.
I started out with 15 thousand...


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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

Thanks!
Its so hard when you get so many different answers!


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You can discover more about a person in an hour of play than in a year of conversation.        ~Plato

Yes I know what you are talking about.
Everyone gives you false information.


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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

thank you! I am currently looking for a good CPA here in my area-
I will be sure to write down some of these points!

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You can discover more about a person in an hour of play than in a year of conversation.        ~Plato

Just my 2 cents...

I have been involved in purchasing and selling companies, and have never seen the number of shares matter. All that matters is percentage of ownership.  I have been involved in companies with one share (literally) and with millions of shares... it is all irrelevant. 

Who owns what and at what percentage is what matters.

So I suggest pick a number you feel good with, but high enough that you can break it down to percentages that work should other people gain equity in your company.

Best of luck.

 

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--
Mike Michalowicz
Author of The Toilet Paper Entrepreneur

BonBon,

A few quick points:

1. Many states charge fees according to total number of shares authorized.(example = new york charges $.05 per share over 200)

• So If you are going to be the sole owner and do not expect to have any investors - then the number of shares authorized is moot. Pick a small number that won`t trigger extra expense. (in NY that is 200)

2 In most "business friendly" states, changing the number of shares authorized is easy - file a form and pay a fee.

3. However, if you are planning to raise capital by selling shares (or other corporate securities) then it behoves you to develop a basic capital strategy before you incorporate.

4. Investors generally prefer to have a fairly low per share price on the stock they purchase.  (ie less than $1.00 for seed round)

5. My final point - If you are going to raise capital by selling any type of security (stock, bond, debenture, etc) - you should seek professional guidance. For legal advice I`d go to an Attorney that specializes in securities law.

Remember, doing it "right" the first time is always faster and cheaper than "fixing" it later.

Good luck with your new business.

Robert

 

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
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