How Many Shares Should be Issued to Founders at Incorporation?
I typically advise issuing 50% to 80% of the authorized shares of Common Stock to the initial founders upon incorporation.
Thus, if the certificate of incorporation authorizes 10,000,000 shares of Common Stock, an aggregate of 5,000,000 to 8,000,000 share should be issued at incorporation.
If the startup plans to bring on additional founders in the very near future, or for some reason wants a large option pool, then that initial number should be closer to 50% than 80%.
While your startup can always authorize additional common stock (upon appropriate board and stockholder consent), keeping a good-sized reserve of unissued, but authorized shares means that you will not have to incur the transaction costs associated with increasing the authorized shares. In order to increase the authorized shares, your startup will have to file a certificate of amendment with the secretary of state which has filing fees associated with it.
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