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How many shares does 13% equty equal?

Discussion in 'Starting a Business, Incorporation' started by Bpark73, Aug 16, 2019.

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  1. Bpark73

    Bpark73 Law Topic Starter New Member

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    Jurisdiction:
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    Hello,

    I'm trying to incorporate my startup in CA and the shareholders will be me and a small investor whom I'm giving 13%.

    I'm confused about "shares per value". I've read it doesn't have real implications and to set it low ($0.00001). However someone else told me "shares per value" is what each share is worth?

    So for instance if I authorize 1000 shares at Shares Per Value set at $1, does this mean my company is worth $1000 and each share is worth $1?

    I would love some clarification as to how to set my "share per value".

    Thank you in advance
    Brian

    Hello everyone sorry for another noob question,

    I'm filing an S-Corp for my startup with a seed investor. Authorizing 10M shares with par value $0.00001 (4 zeros).

    If I'm giving my investor 13% equity in the company so how many shares does that equate to?

    Company valuation = $500k
    Seed investment = $65,000

    Thank you for your patience and help
    Brian

    Ok thank you....so then irregardless of value, I would be issuing 1.3M shares?

    It's not the math I can't figure out, I'm trying to make sure I'm understanding the terminology to do the correct math.Thank you



    Thank you for the reply. I'm a bit confused with your explanation. I'm authorizing 10 million shares but NOT issuing all of it. My investor is getting 13% equity so wouldn't that mean I'm issuing to him 1.3million shares? Meaning 10million x 0.13 = 1.3 million

    However in your explanation you are saying to multiply 0.13 with 1.3million.


    Thank you ZIgner. I have one more question and I will get out of your way. Thank you again for your time!

    My investor is asking me for the value of his share for his book keeping and taxes. Is this essentially his Issued Shares x $0.00001 (par value)?



    The benefit of asking for direct legal advice isn't beyond me....I get it. However what's the point of online forums if we cannot ask simple questions for help? Others have been quite helpful, I don't understand the point of you continually repeating the obvious. Thank you for your time. Next...



    LOL.... I love the sense of community here. Wow you guys all sound like a bunch of jerks. Thank you for your time everyone. Bye
     
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  2. zddoodah

    zddoodah Well-Known Member

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    I don't think I've ever heard that term in my life. Where did you see it? Any chance you meant "value per share"?

    Read it where? What does "set it low" mean? Where are you setting this?

    Is "someone else" an attorney?

    No (although the lack of context makes it impossible to be certain about this).

    Consult with a local attorney. You're likely making a dozen or so mistakes that could have serious implications for the future of your company.
     
  3. army judge

    army judge Super Moderator

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    Don't trust your finances to strangers.

    Do speak with a TRUSTED financial adviser, CPA, or attorney.

    You could also initiate your own research.



    It that a "someone" that has knowledge of the process, as in an EXPERT, or just some "dudette" or "dude" with whom you have a passing acquaintance?

    Again, seek professional advice, as in PAID professional advice, not advice from purported "know it alls".
     
  4. Tax Counsel

    Tax Counsel Well-Known Member

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    If you use one of the standard forms for incorporation provided by the California Secretary of State, like the Form ARTS-GS for a general stock corporation (there are several different kinds) you will see that none of them ask for either a par value of the stock or a value per share (there is no such thing in the world of corporate law as "shares per value"). They simply ask for the number of shares to be issued and, in the case of the close corporation, the number of shareholders of the corporation. The reason it is not asked for in the forms is that it is not required in the articles of incorporation under California Corporations Code section 202. So what is it exactly that you are trying to fill out that asks for this information?

    I recommend that you have an attorney draft a custom articles of incorporation and corporate bylaws rather than using just the bare bones form the state provides in order to help guard against certain problems that could arise between you and your business partner down the road. But you can use the state form if you want. Either way, California does not require that you state anything in the articles of incorporation about the value of the stock issued.
     
  5. Zigner

    Zigner Well-Known Member

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    This is a math question. You need to figure out what 13% of 10M shares. The value has no relevancy in your question.
     
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  6. Zigner

    Zigner Well-Known Member

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    If you wish...but yes, 13% of 10 million is 1.3 million. If by 10M you mean 10,000, then yes, 1,300 is 13% of 10,000
     
  7. hrforme

    hrforme Active Member

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    To be honest, I hope you have an attorney or accountant helping you with this startup if you can't figure out a very basic math question. The math will only get harder from here on out.
     
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  8. zddoodah

    zddoodah Well-Known Member

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    Allow me to repeat and emphasize what I wrote previously:

     
  9. Tax Counsel

    Tax Counsel Well-Known Member

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    And that assumes that you are going to issue all of the 10 million shares you authorized. As I pointed out on another site where you asked this question you don't have to issue all the shares you authorized. What you do is multiply the shares you will actually issue by 13% (0.13) to determine how many of the issued shares your investor will get.

    As I said before, you likely should see a tax attorney for help, and likely a business attorney too. You don't want to screw this up. If you do it on your own and mess it up, it could cost you far more later than the fees you pay to attorneys now to get it right.
     
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  10. hrforme

    hrforme Active Member

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    asking on random legal forums from strangers is not the best way to go about this. You stand to loose far too much by not contacting local legal help who knows all the details and can help you set this up in the best interests of all concerned.
     
  11. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Because you really don't seem to understand the answers.
     
  12. Zigner

    Zigner Well-Known Member

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    I was getting ready to reply until you decided to be rude to the volunteers here.
     
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  13. Tax Counsel

    Tax Counsel Well-Known Member

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    No. Let's say you decide to issue only 5 million shares, leaving the remaining 5 million shares unissued for use later. Unissued shares don't count. No shareholder owns them. Those shares don't count for shareholder votes. Only the shares that are issued and outstanding count. You said that it's just the two of you in this business and the investor gets 13%. So if you issue 5 million shares, that means he gets 0.13 x 5 million = 650,000 shares. You would then get the remaining 4,350,000 shares (87% of the issued shares). It's pretty simple. But focus on the total shares you plan to issue, not the authorized shares. Shares that are authorized but not issued do not count. If you have trouble understanding this then you do need to see a business lawyer and tax lawyer to help you get it right. If you screw it up, it'll cost you a lot. For example, if you don't get the shares right it could cost you more in tax and might even mean that the corporation does not qualify for S-corporation status.
     
  14. army judge

    army judge Super Moderator

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    This thread has served it's purpose.

    Closed......
     

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