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C Corporation - number of shares

Discussion in 'Legal Aspects of Running a Business' started by Yetij, Apr 6, 2017.

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  1. Yetij

    Yetij Member

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    Hello,

    So, I'm setting up a company in Delaware and I have one question:

    How will the number of shares affect my future?

    I know that I could take up to 5.000 shares and pay annual franchise tax of $175. Or take a large number like 10.000.000 and pay through Assumed Par Value Capital Method that should allow me to pay $350 annualy, if the Par Value is low (0.00001) and I have no income, employees etc.

    I heard that 10 million is standard and required to get any financial support, investors etc. The problem is that I'm quite scared that I'll do something wrong and end up with thousands of dollars franchise tax for having a lot of shares. Could I start with 1k and then change it to 10 million later?

    If looking for professional advice is in this case absolutely necessary, could you tell me what exactly I should hire my lawyer for and what cost should I expect?

    Thanks
     
  2. VirtualGlobalPhone

    VirtualGlobalPhone Moderator MVP Member

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    Hello @Yetij, If you started company to sell your awesome product or services globally then don't even think about all these share etc simply close your eyes and start with minimalist annual commitment.

    I believe, US taxation is no more user friendly !!!

    If you are looking at seed funding etc then i suggest you look for ATLAS program of stripe - google it.
     
  3. Yetij

    Yetij Member

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    Thanks @VirtualGlobalPhone , yes, actually we apply for ATLAS program! :) And they ask you to choose the number of shares - they set 10 million by default, but I'm a bit afraid that we will have to pay a huge tax at the end of a year.
     
  4. VirtualGlobalPhone

    VirtualGlobalPhone Moderator MVP Member

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    :) ATLAS is good if you can break even and get investor within 12 to 15 months else it may be costly affairs as the tax and other statuary will eat the business off before it even lifts the head.

    Consult a auditor or other firm who involve in opening LLC is Delaware they will guide you better.
     
    djbaxter likes this.
  5. Yetij

    Yetij Member

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    @VirtualGlobalPhone what are the tax and other statuary that I'm not aware of after 12 months?

    Is it not possible to simply close the business after 12 months?
     
  6. VirtualGlobalPhone

    VirtualGlobalPhone Moderator MVP Member

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    @Yetij , Closing is always eazy...

    But i guess you should not think of opening and closing in the same breath. :) , If it is its better not to open.

    We "modern" thinkers , always approach everything with exit strategy . Probably that's why we don't see that level of output like the initial industrial and IT revolution.

    Always go ahead and see the highest peak of your business and then work backwards. If your present starting of company in Delaware adds real value in that walking back story then go with either ATLAS - c Corporation or pvt company - LLC.

    Best wishes..
     
    djbaxter likes this.
  7. Yetij

    Yetij Member

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    Sure thing, thanks for your help :)
     
    VirtualGlobalPhone likes this.

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