Raising money · A term for founders abroad
What are authorised shares?
The most shares a corporation may issue, set in its certificate of incorporation; ten million is common for a startup.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 9 of 105 in the glossary, filed under A.Delaware Division of Corporations: how to calculate franchise tax
Authorised shares, for a founder abroad.
A corporation's certificate authorises a number of shares, often ten million for a new startup. Authorising shares gives nobody ownership; issuing them does. The founders are usually issued most, and the rest stay unissued for an option pool and later rounds.
The number drives Delaware's franchise tax. Worked out on authorised shares alone, ten million cost $85,165 a year; on the assumed par value capital method, a new startup with modest assets usually pays the $400 minimum. You choose the method when you file.
Sources: Delaware Division of Corporations: how to calculate franchise tax.
Read next · guide · 3 minHow a foreign-owned Delaware C-Corp is taxed: Form 1120, franchise tax and dividendsWhat founders ask next.
- How many shares should a Delaware startup authorise?
- Ten million at a tiny par value is common, with eight million or so issued to the founders. The cap table guide explains why.
- Does authorising more shares dilute me?
- No. Only issuing them does.
03 · See also
- Raising moneyPar valueA nominal minimum price per share set in the certificate of incorporation, such as $0.0001; it lets founders buy their shares for very little.Read the term
- Raising moneyCap tableThe record of who owns what share of a company, including options, SAFEs and other convertible instruments; investors read it first.Read the term
- Keeping the company in good standingFranchise taxA state's yearly tax on a company for existing or doing business there, nothing to do with franchises; Delaware corporations and Texas companies owe one.Read the term
- Raising money83(b) electionA founder's choice to be taxed on restricted stock when it's granted rather than as it vests, filed with the IRS within 30 days, with no extension.Read the term
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