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In-Depth Incorporation FAQ

What are authorized shares?

The authorized shares are the total number of shares set out in the Articles of Incorporation. This term is only applicable to corporations. After incorporation, the Board of Directors is responsible for determining if and when to issue the authorized shares. A great deal of the authorized shares will be issued at the start of the company, but the remaining authorized shares may be issued at later dates. However, there is no requirement that the total number of authorized be issued at some date.

It may be wise for the company to authorize more shares in its articles than it plans to issue. This will allow the company flexibility to issue more shares if a second round of financing is required. Naming 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.