The Company's Owners

The owners of the company do not have to be determined prior to incorporating.

Number of Shares Common Shares Preferred Shares

 Number of shares the corporation is authorized to issue - for corporations

At the time of incorporation, the incorporation documents specify the total number of shares that the corporation can issue. These are called the “authorized shares”. The Board of Directors is responsible for deciding if and when to issue the authorized shares. When shares are actually given to the shareholders, they become issued, authorized shares.

When determining ownership percentages, the number of authorized shares is not a factor. All that is considered in determining ownership is the proportion of shares issued to each shareholder, not the actual number of shares.

It may be wise for the company to authorize more shares than it plans to issue. This will allow the company flexibility to issue more shares if a second round of financing is required. Designating a small amount of authorized shares in the articles will limit the company’s ability to do this. The number of shares authorized can only be changed by officially amending the articles with the Secretary of State.

Note that designating a large number of authorized shares may increase the state filing fees in a limited number of some states. Our system will alert you during the application process if your state does this.

Designating the number of authorized shares is done in the Articles of Incorporation for C-Corporations and S-Corporations and does not apply to LLCs. In an LLC the shares are called “membership interests,” and the shareholders of the LLC are called its “members.”

• the right to vote at the shareholder meetings,
• the right to receive dividends (if and when distributed), and
• the right to receive the company’s remaining assets upon dissolution.

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