Last reviewed October 7, 2026 · By the NYBACS advisory team
Short answer
A common starting point for a venture-oriented Delaware C-Corp is about 10,000,000 authorized common shares at a very low par value such as $0.00001, with most issued to founders and the rest held for an option pool. A wholly owned subsidiary needs far fewer. Whichever you choose, the authorized share count drives Delaware franchise tax, so plan to file using the assumed par value capital method where it is lower.
Key takeaways
- Delaware's authorized shares method charges $175 for up to 5,000 shares, $250 for 5,001–10,000 shares and $85 for each further 10,000 shares or part, capped at $200,000.
- The assumed par value capital method charges $400 per $1,000,000 of assumed par value capital or portion, with a $400 minimum.
- Delaware tells corporations to use the method producing the lesser tax, but the alternative method requires issued shares and gross assets to be reported.
- Shares with a par value cannot be issued for less than par, which is why startups use very low par values.
- Preferred stock is usually authorized later, through an amended and restated certificate when investors' terms are agreed.
The numbers you set at incorporation
- Authorized shares — the maximum the company may issue, stated in the certificate of incorporation. Increasing it later needs a charter amendment.
- Par value — a nominal legal minimum price per share, also in the certificate. It is not the share's market value.
- Issued founder shares — what the board actually issues to founders or the parent, under stock purchase agreements.
- Unissued reserve — authorized but unissued shares available for a future option pool, advisers and investors. The pool itself is created later by a board-adopted equity plan.
Only the first two appear in the public filing. The rest live in board consents, the stock ledger and the cap table.
Why startups use millions of shares and tiny par values
A large share count makes equity granular: an early employee can receive 20,000 options rather than a fraction of a share. A low par value keeps the founders' minimum purchase price trivial — 8,000,000 shares at $0.00001 par cost $80 — while satisfying the rule that par-value shares cannot be issued below par.
Issuing most but not all authorized shares to founders at formation leaves headroom for an option pool without an immediate amendment. Issuing every authorized share leaves none, and the next grant requires a stockholder-approved amendment.
How share structure drives Delaware franchise tax
Delaware computes franchise tax two ways and the company pays the lesser — but its annual notice often shows the authorized shares figure, because that needs no input from the company. Consider a startup with 15,000,000 authorized shares at $0.00001 par, 12,000,000 issued, and gross assets of $400,000 on its federal return:
| Method | Calculation | Tax |
|---|---|---|
| Authorized shares | $250 for the first 10,000 shares + $85 × 1,499 further blocks of 10,000 | $127,665 |
| Assumed par value capital | $400,000 ÷ 12,000,000 issued = $0.0333 assumed par; × 15,000,000 authorized = $500,000 | $400 (minimum) |
The $50 annual report fee is added in either case. The assumed par value capital method only works if the annual report includes issued shares and gross assets — Delaware takes gross assets from total assets on the company's federal return. A company that files without them is left with the authorized shares figure.
Simpler structures for wholly owned subsidiaries
A US subsidiary owned 100% by a foreign parent, with no plans for employee equity or outside investors, gains little from the venture template. Authorizing 5,000 shares or fewer keeps the authorized shares method at its $175 minimum, makes the calculation transparent, and still allows the parent to hold every share. If the group later wants to grant equity to US managers, the certificate can be amended to authorize more shares at that point.
Issuing founder shares correctly
- Board consent approves each issuance, the price per share and the consideration — cash, assigned intellectual property, or both.
- Stock purchase agreement for each founder, usually with vesting and a company repurchase right for unvested shares.
- Payment and IP assignment are completed so the shares are validly paid for.
- Section 83(b) election within 30 days of the issuance, where a founder is or may become a US taxpayer and the shares are subject to vesting — missing the window cannot be fixed.
- Stock ledger and cap table updated the same day.
Founders resident outside the US should also check home-country rules on acquiring shares in a foreign company; Indian residents, for example, follow India's overseas investment rules through their bank.
Where a foreign founder or parent pays for shares by international wire, keep the bank confirmation with the board consent. A corporation that is 25% or more foreign-owned reports such transactions with its foreign shareholders on Form 5472, so the payment needs to be traceable from the first day.
Common mistakes to avoid
- Paying the authorized-shares figure on Delaware's franchise tax notice without recalculating under the assumed par value capital method.
- Filing the annual report without issued shares and gross assets, so the lower method cannot be applied.
- Issuing 100% of authorized shares to founders, leaving nothing for an option pool without an amendment.
- Setting a par value of $1 with millions of shares, forcing founders to pay large sums or risk below-par issuances.
- Copying a 10,000,000-share venture template for a wholly owned subsidiary that will never issue equity to anyone else.
- Missing the 30-day Section 83(b) window for vesting founder shares.
NYBACS 360° support
How NYBACS helps
- Recommends authorized shares and par value that fit your plans — venture-backed startup or wholly owned subsidiary.
- Prepares founder issuance consents, stock purchase agreement packs and the stock ledger, coordinating with counsel on vesting terms.
- Files Delaware's annual franchise tax report with issued shares and gross assets so the lower method can apply.
- Keeps the cap table and stock ledger consistent with the certificate and every later amendment.
Frequently Asked Questions
Is 10,000,000 authorized shares a legal requirement?
No. It is a market convention for venture-oriented startups. Delaware sets no minimum beyond what the certificate states, and a subsidiary or closely held company can authorize far fewer.
Can we increase authorized shares later?
Yes, by amending the certificate with board and stockholder approval. Remember that a higher authorized count raises the authorized-shares figure on Delaware's next franchise tax notice.
Does par value determine what investors pay?
No. Par value is a legal floor. Investors pay a negotiated price per share that is usually far above par, and the excess is recorded as additional paid-in capital.
Where does Delaware get the gross assets figure?
From the total assets reported on the company's federal income tax return, Form 1120 Schedule L. A first-year company should use its year-end balance sheet consistently with that return.
Should we authorize preferred stock at incorporation?
Usually not. Preferred stock terms are negotiated with investors, so most startups authorize only common stock at formation and add preferred through an amended and restated certificate at the first priced round.
