If you are
approaching the phase of your business where incorporation is the next move
then congratulations!
This is a positive step towards expanding your business
and bringing in an infusion of cash.
Every province will
have their own distinct set of rules for articles of incorporation. Some of
these "zones" are more corporation friendly than other regions. No
matter where you land, you'll more than likely be required to write up bylaws,
explain the roles on your board of directors and their responsibilities and
issue stock.
Questions such as:
how many shares should be authorized for an incorporation? Who should be listed
as officers and directors? How many shares should be created?
You'll have to
look at the big picture of your business for the right answer.
Millions of Shares
Every single stock
certificate represents a piece of the company. The owner of that stock is
entitled to a dividend based on the stock's performance and the amount of
stocks they own. A typical offering of common stock could be anywhere between
10 to 15 million shares.
You can break this
down as 8 million shares divided among the founders and 2 million shares for an
option pool. The rest can be held in reserved and released down the road.
Whatever amount you settle on for the initial release you have to stick to the
number.
If you want to
increase the amount of shares available that will have to be put to a vote by
the board of directors and shareholders because they are all now part-owners.
That first number
of shares is also important when you are considering offering them as employee
incentives. In other words, you don't want to give everything away all at once
and you want to make the incentive large enough to attract good talent.
Stocks for the Small Business Owner
Set aside the
headline grabbing IPOs like Facebook or Yahoo. The typical startup can have a
stock price share beginning at around $15. Add them up to 20 million shares and
you've got a $300 million market cap. That would be an extremely successful IPO
launch. It also allows for plenty of buffer room that can prevent stocks from
splitting at the time of the launch.
From a small
business perspective, you can incorporate your company and issue a single share
of stock. Keep in mind that the more shares you do end up issuing the more
you'll pay in corporation filing fees.
Before making that
call, plot out where you see your business in 5, 10 and 20 years from now. If
it's just going to be you and your family running things you might not need to
go big. However, if you're goal is to go global, let your stock offering
reflect that plan.
For more information on shares, articles of incorporation, and how to incorporate your business in Canada, please visit our website.
