How many shares should be authorized in the certificate of incorporation?

Takeaway: Authorizing 10–15 million shares of common stock at incorporation is a common startup practice that maximizes flexibility for equity grants and fundraising without affecting company valuation.

When filing your Certificate of Incorporation in Delaware, you must state the total number of shares the company is authorized to issue. For first-time founders, this can be confusing—does a higher number imply a higher valuation or more control? In reality, it’s an administrative choice that affects ease of operations, not ownership percentages or valuation.

Most venture-track startups authorize 10–15 million common shares at formation. This figure is widely recognized, avoids unnecessary amendments later, and provides room for founder equity, an employee option pool, and early fundraising.

Why Authorize So Many Shares?

The main reason is psychological and practical—it creates a low “per share” price that works well for equity compensation.

Example:

  • If you authorize 1,000 shares and the founders own them all, each share is 0.1% of the company.

  • If you authorize 10,000,000 shares and founders own 8,000,000, each share is a much smaller fraction of ownership.

This means you can grant an employee an option for 20,000 shares, which feels substantial. With only 1,000 total shares authorized, the equivalent grant might be 2 shares—far less compelling.

Flexibility, Not Valuation

The number of authorized shares does not determine your company’s value. Valuation is a function of price per share multiplied by the number of outstanding shares, not the number of authorized shares.

Authorizing a larger number upfront gives you the flexibility to:

  • Issue founder stock.

  • Establish an employee stock option pool.

  • Issue preferred stock in future financings.

If you start with too few shares, you may need to amend your Certificate of Incorporation to authorize more—an avoidable legal step if planned correctly.

Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.