How much stock do they issue?

August 25, 2006 11:07 AM

I am forming a New York S corporation for two business partners. How many shares is a normal amount of stock to issue? Why?
posted by whitebird to Work & Money (5 answers total)

IANALOAA*, but from my experience, the number of shares depends on your exit and growth strategy. I took part in one S corp where there were 10,000 initial shares, but that number needed to be increased as a result of an employee option plan, otherwise employees would be receiving amounts like 12 or 20 shares, which looked bad. You want enough shares so that you can give away fine-grained amounts that look reasonable - I don't know of any downside to larger numbers of shares, except that it can make shares look worthless or silly.

Put it this way - do you want your share price to be a dollar? 10 cents? Decide based on your current valuation and your future expected valuation. Or ask your accountant.

* I am not a lawyer or an accountant
posted by blahblahblah at 11:38 AM on August 25, 2006

Best answer: New York charges an origination fee (Tax Law Section 180) for all shares issued or authorized at the outset. The fee is 1/20th of 1% of par for each share, or $0.05 for no par shares. 10,000 initial shares (no par) will thus cost you $500 in addition to the $125 initial filing fee. More details are here. I don't recall if New York also charges an annual share tax -- some states do I just don't remember if New York is one of them.
posted by The Bellman at 12:04 PM on August 25, 2006

100 shares, par value one cent per share, is a pretty common practice among New York attorneys for a closely-held corporation (S or C). I wouldn't go so far as to call that common practice "normal" -- circumstances and requirements vary.
posted by MattD at 1:58 PM on August 25, 2006

When I incorporated a Delaware C corp with my co-founder, we did 8M shares per the advice of an advisor. But then, Delaware doesn't have per-share taxes, so it didn't really matter.
posted by heresiarch at 4:29 PM on August 25, 2006

Response by poster: Thanks, everyone, for the helpful feedback!

I did a bit of research and found out that the "default" amount, as noted by the NYS Department of State, is 200 shares, for which you pay $10 in taxes.

As there are only two partners, I will probably live it at 200 shares.
posted by whitebird at 9:33 AM on August 28, 2006