Issuing stock when incorporating?

Question

What class of stock should I use? value or no par value is better

for a one person owned company? how many shares should/can I take in the beginning and can a small portion of the stocks be issued public? how can I go public right away?

Answer 1

The type of stock that you would issue for a basic corporation is simple common stock.  Most companies use a par value of no more than $10 (this does NOT limit the value of the stock to that amount).

As far as how many shares to issue, that is in part determined by state law and your wishes.  The more shares you issue, the easier it is to divide equity in the future for purposes of selling a percentage of it, or for inheritance purposes if you want to pass it on to heirs.

For example, some states require that you issue at least 100 shares.  A couple states allow you to issue just one.  If you like you can issue the minimum allowed in your state.  But what if you would like to pass on the corporation to heirs?  Well in that case, you may want to issue more than the minimum.  Lets say that you end up with 4 heirs.  If you issue 1000 shares, you can give each 250 shares as an inheritance.  They, in turn, may further divide those share among their heirs, and so on.

In other words, the minimum is decided my the state that you incorporate in.  The actual amount of shares that you issue should be decided after thinking about what you would want to happen to your company in the future.

Also keep in mind that regardless of the number of shares that you issue now, you always have the option of "splitting" shares in the future, or doing a reverse split if you want less.