The two numbers your C-Corp Articles of Incorporation require — authorized shares and par value — confuse more founders than any other line item. Both are legal formalities, and getting them wrong either costs you franchise tax later or forces an amendment to your charter.
Authorized vs. issued vs. reserved
These three numbers work together:
- Authorized shares — the maximum your corporation is legally allowed to issue, set in the Articles. It's a ceiling, not what you own today.
- Issued shares — the shares actually distributed to owners, recorded in the stock ledger.
- Reserved (unissued) shares — the remainder held for future investors and employee stock options.
A common founder setup: 10,000,000 authorized, 4,000,000 issued to founders, 6,000,000 reserved.
How many shares should you authorize?
The startup standard is 10,000,000:
- Plenty of room for future funding rounds and an employee option pool (usually 10–20% of the company).
- Avoids an amendment — raising the cap later requires a shareholder vote and a filing.
- Keeps per-share math simple when setting option prices.
If you're a small, non-venture business, 5,000 or fewer can keep Delaware franchise tax at the minimum. The right number depends on your plans — there's no one-size-fits-all, but 10,000,000 is the safe default for fundraising companies.
What par value actually is
Par value is the legal minimum price per share, stated in the Articles. It's a floor for accounting only:
- It has nothing to do with what your stock sells for.
- Most founders set it at $0.00001 (or $0.0001) — just above zero to satisfy legal requirements.
- Keeping it low keeps state filing fees and franchise taxes down.
How your shares actually get issued
- We file your Articles — your authorized share count and par value go into the Articles of Incorporation.
- The board authorizes issuance — at the organizational meeting, the board passes a resolution issuing a portion of the shares to founders.
- Owners are recorded — each issuance is recorded in the stock ledger and confirmed with stock certificates.
- The rest stays in reserve — unissued shares wait for investors and options — no amendment needed.
Common stock vs. preferred stock
- Common stock — what founders and employees get. Voting rights, dividend rights if declared. The only class most startups authorize at formation.
- Preferred stock — what investors typically receive. Liquidation preferences and dividend rights, added at the first funding round — not at formation.
Common questions
Can I change the number of authorized shares later? Yes — but it requires a shareholder vote, an amendment to your Articles, and a filing fee. That's why founders authorize plenty up front.
What happens if I issue more shares than authorized? Issuing over the authorized amount is legally void — the transaction doesn't count. Increase the cap first, then issue.
Does par value set the price I sell stock for? No. Par value is only the legal minimum. The actual price is set by the board and investors, usually far above par.
Do I need preferred stock at formation? Usually not. Startups form with common stock only. Preferred stock is added at the first funding round.
Ready to start your C-Corp?
We file your Articles with the right share structure and par value for your goals — and set up the stock ledger, bylaws, and certificates so your cap table is clean from day one.