Company Ownership Setup

Enter ownership and management details for your new company

What you get with this starter tool:

Of all the decisions you'll make in forming a new company, two of the most important are who owns what portion of the business, and who will be responsible for management and decision making. This tool is designed to help you make those decisons, and to make sure they're good decisions.

If you're forming an LLC, this Starter Tool will guide you through issuing "membership interests" to each of the company's initial owners, and designating the initial "managers" of the company.

If you're forming a corporation, this Starter Tool will guide you through issuing shares of stock to each of the company's initial owners, and designating the initial Board of Directors and officers of the company.

Who needs this starter tool:

The Company Ownership Setup is for starters who want to select the ownership and management structures they want for their new company in preparation for creating and filing the company's legal formation documents.

We recommend you use this tool as a part of the comprehensive Legally Form Your Company Starter Guide (link below), which contains a complete set of instructions and tools for forming a new LLC or corporation.

Related resources:

Details about this starter tool:

Cost:

Included

Department:

Legal

Company Stage:

Launch

Frequently Asked Questions (20)

Can I change the ownership of my company after it's formed?
Yes, but this requires the preparation of legal documents and may have tax and other consequences. If you need to change the ownership of your company after it is formed, we strongly recommend you speak with an experienced business attorney in your state.
Can I change the management of my company after it's formed?
Yes, but this requires the preparation of legal documents. If you need to change the management of your company after it is formed, we strongly recommend you speak with an experienced business attorney in your state.
Can another legal entity (corporation, LLC, etc.) be an owner of my company?
Legally, yes in most cases. However, to encourage simplicity, Startomatic does not currently support this type of ownership structure for either corporations or LLCs.
How does the ownership of an LLC work?
In limited liability companies, owners are issued "membership interests" on a percentage basis, and are called "members" of the LLC. A member's membership interest is also sometimes referred to as their "equity" in the LLC.

Keep in mind that the member or members who own a majority of the membership interests of of the company (i.e., more than 50% of all issued membership interests) usually control the election of the company's managers, and the managers control the major decisions of the company.
Can the LLC issue new membership interests to existing or new members in the future?
Yes, as long as it is allowed by the terms of the Operating Agreement, the LLC's managers can generally issue membership interests to new members on terms and for consideration (value) that is fair to the LLC and its existing members.
Can my LLC issue preferred equity or other classes of membership interests in the future?
Yes, but first you would need to amend your company's organizational documents. For this, you would want to consult with an experienced business lawyer in your area.
How does the management of an LLC work?
An LLC is managed by it Managers, who fill the roles similar to those of both directors and officers of a corporation. Managers are elected by the LLC's "members" (owners), and control both the major decisions of the company, including overall business strategy and budget, and the day-to-day operations like hiring employees, opening bank accounts, and signing contracts.

There are certain major company actions - such as admitting new members, taking on unusually large expenditures or debts, and amending the company's organizational documents, which may require the approval of the members. These items are laid out in the company's Operating Agreement (similar to Bylaws and a shareholders' agreement in a corporation), which you will create later in the Startomatic process.

How many managers should my LLC have?
A typical small business LLC has between one and five Managers. You may find it helpful to have an odd number of Managers, to avoid a deadlock (tie vote) among the Managers.
What are the roles and responsibilities of the Managers?
Managers have ultimate authority over day-to-day activities of the company, including hiring employees, negotiating and entering into contracts, and maintaining the corporate and financial records.
How does the ownership of a corporation work?
In corporations, owners are issued shares of stock and are called "shareholders" (or "stockholders" - they mean the same thing). A shareholder's shares are also sometimes referred to as their "equity" in the corporation.

For simplicity, and because it's the right choice for the vast majority of new businesses, Startomatic only allows you to issue common stock. There are many other types of stock (preferred, nonvoting, etc.), but common stock is the simplest and most, well... common. If you need to create different classes of stock in the future, you can do that with the help of a business lawyer.

A corporation's formation document (usually called Articles of Incorporation or Certificate of Incorporation) specifies the maximum number of shares of stock that may be issued, or its "authorized shares". The shares that are actually issued to the shareholders are called "issued shares".

In most cases, Startomatic defaults to 200,000 authorized shares; however, this tool allows you to change the number of authorized shares if you like. (Note that for Delaware corporations, we default to 5,000 authorized shares in order to save you money on filing fees and annual Delaware franchise taxes. You can change this if you like, but be aware of what a large number of authorized shares in Delaware may mean for your annual taxes and fees.)

It is also important to keep in mind that the shareholder or shareholders who own a majority of the shares of stock of of the company (i.e., more than 50% of all of the issued shares) usually control the election of the company's board of directors, and the directors control the major decisions of the company.
How many shares should I issue to each shareholder?
There's no "right" answer to this question, but there are a couple of things to consider when deciding how many shares to issue to each shareholder.

Most importantly, the number of shares issued should reflect the relative ownership of each shareholder.

Second, it is helpful if the number of shares issued keeps the math simple and avoids needing to issue fractions of a share - for example, you wouldn't want to issue 10 total shares, because a 1% owner would have to be issued one-tenth of a share, which is problematic, and not actually possible in Startomatic.

Startomatic recommends issuing a total of about 100,000 shares to the corporation's founders. This keeps the math simple.
What's the difference between "authorized shares" and "issued shares"?
"Authorized shares" is the maximum total number of shares that the corporation could issue without amending its formation document. Startomatic usually defaults to 200,000 authorized shares, but you can change the number of authorized shares (before the company is formed) in this Starter Tool.

"Issued shares" is the number of shares actually issued to shareholders.

It's important to note that ownership of a corporation is based on issued shares, not authorized shares

For example, in a corporation with 200,000 authorized shares, 90,000 shares issued Shareholder A and 10,000 shares issued to Shareholder B, the ownership of the company is 90% Shareholder A and 10% Shareholder B. The remaining 100,000 authorized (but not issued) shares are irrelevant for ownership purposes unless and until they are issued to an existing or new shareholder.
Can a corporation issue new shares to existing or new shareholders in the future?
Yes, the corporation's Board of Directors can issue shares to new shareholders on terms and for consideration (value) that is fair to the corporation and its existing shareholders.

However, issuing new shares in the future requires the preparation of legal documents and may have tax consequences; therefore you should speak with an experienced business lawyer in your area should you decide to issue new shares in the future.
Can the corporation issue preferred stock or other kinds of stock in the future?
Yes, but first you would need to amend your company's organizational documents. For this, you would want to consult with an experienced business lawyer in your area.
How does the management of a corporation work?
Corporations have a very specific management structure, laid out in more detail in the Bylaws, which you will create at a later step. In a nutshell, the shareholders elect the directors. The directors appoint the President and other officers, and control the other major decisions of the company, such as setting overall corporate strategy and budget.


The officers (usually a President and a Secretary, and sometimes also a CEO, Treasurer and one or more Vice Presidents) manage the day-to-day operations of the corporation, including signing agreements, opening bank accounts, and hiring employees. Your corporation is required to have at least a President and a Secretary, and we recommend that these roles be held by two different people.
How many directors should my corporation have?
A typical board of directors for a small business has between one and five members. You may find it helpful to have an odd number of directors, to avoid a board deadlock (tie vote). Directors are often - but not always - also shareholders and officers.
What are the roles and responsibilities of the corporate officers?
President / CEO - Both positions carry the same responsibility - they are the officer with ultimate authority over day-to-day activities. If there are both a President and a CEO, the CEO has the higher authority.
Vice President - Fulfills the responsibility of the President and/or CEO in their absence.
Secretary - Maintains the corporate and shareholder records. If there is no appointed Treasurer, the Secretary is also responsible for financial records and reports.
Treasurer - Maintains the company's finances and financial records.
What is a registered agent?
A registered agent is an individual or company located in the corporation's state who is responsible for receiving regular notices from the state (such as annual report filing notices and tax information) as well as legal paperwork (like lawsuits and more routine stuff). A registered agent must have an address at which someone is available during business hours to receive documents, and must forward documents to the company.
Who can be a registered agent?
Generally, any person or company with an address in the state of the corporation's formation at which someone is available in person during all normal business hours.
Should I be my own company's registered agent?
If you don't mind a little extra paperwork and you have an address at which someone is generally available to receive notices during regular business hours, you can serve as your own registered agent and save yourself the annual fee for hiring a professional registered agent, which is $99 per year through Startomatic. Keep in mind that the address of a registered agent is publically available through the Secretary of State of your state of formation.

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