Upon Incorporating C Corp, How to Calculate Amount of Common Shares and Par Value

[SearchRescueGuy]

My question involves business law in the state of: Delaware

I'm not sure how to figure out the amount of shares and the par value. Should the total equal the net worth of the business or more or less? What is the rule of thumb on this type of situation?

What would be the down side to having an amount less than the net worth?

From what I read in order to stay away from expensive filling fee's the total should be no more than 75000. At a later date how hard is it to increase the number of shares and in doing so having a par value total high than 75000?

[Conrad Hunter]

Most just do a par value of one cent each or ten cents.

Assigning par value to a stock usually just controls how big your filing fee will be.

If you really want to understand par value you can do research on the net. Few people setting up corporations understand it much.

ALL corporations are incorporated as C corporations. Becoming an S corporation is just an assignment with the IRS.

The big drawback of an S corporation is limits on stockholders and the biggie is you can have only one class of stock.
I always use and sell a combination of common and perferred, with a little bit of common stock and lots of perferred to the stockholders, so I can take all common stock and keep control. Never ever split stock evenly.

[SearchRescueGuy]

Thank you for the reply, it is not very easy finding good information on the subject.

When you say a little bit of common stock and lots of preferred, upon incorporating and creating the amounts of stock what would be the best ratio of common vs. preferred? 30% common and 70% preferred? out of lets say a total of 75,000,000 shares at par value of .001

In the hopes of some day getting listed on OTCBB I'm trying to have every thing set up with that in mind. Any suggestions are much appreciated.

[Conrad Hunter]

The types of stock have nothing to do with the incorporation. That is determined in the bylaws.

There is no ratio to speak of, that is up to you. Lets say I put cash and other assets into a corporation. I take 10 shares of common and 1 share of preferred. Everyone else gets one share of common and 10 shares of preferred, ratio wise. Preferred stock gets dividends first, gets distributions in liquidation first, etc. Preferred stock though can't be voted.

You need 55 percent of the voting shares for complete control. If you can't keep control, you still want as much common as possible and you can form voting blocks with other stockholders. I always make sure I have 55% of common.

Getting listed on OTCBB is not as easy as it used to be. The fastest way is to buy a shell corp that is already listed.
You can get a dirty shell for 5 to 10k or so. A dirty shell is one with debt and lots of shares already issued. A clean shell is going to be 50k to 100k or so. That was when the economy was good, so there probably are better deals out there now.
Anyway, your corp buys the shell and reverse merges into it. Then poof -- presto chango, you are an OTCBB traded corporation.

But be careful. You want to be on the pink sheet I think, not the grey sheet. Been a while since I dealt with that.


75 million shares? You are nothing if not ambitious. No "S" corp for you. And Delaware? Unless you live there, typically overkill. Really going to go there every year to hold your annual shareholder's meeting? The ONLY real point of Delaware is if you are doing a large publiclly traded corporation as the law there favors the corporation over stockholders and provides protection against hostile takeovers and other things like that. Nevada makes more sense. In any case, you have to pay a registered agent. You then have to register in your own state as a foreign corporation. You are paying two annual fees, etc.