Authorized Shares

• Authorized shares are the total number of corporate shares the corporation is allowed to issue at any time. For example, if a company has 10,000 authorized shares, no one can at any time own more than 10,000 shares, nor can the total number of shares owned by all share holders exceed 10,000. This, however, is different than the number of shares issued. A corporation does not have to issue all its authorized shares, and the number of shares that shareholders have may at any time be far fewer than the total number of authorized shares.
  
  

Initial Determination

• Whenever people wish to start a corporation, they must file a certificate of incorporation with the appropriate state office. There is generally no set number or range of authorized shares a corporation can issue. For example, Delaware Code Title 8 section 102(4) states that a corporation must include in its certificate of incorporation the total number of shares the company is authorized to issue. The law does not state what number that has to be and it is up to those filing the articles to make that determination.
  
  

Modification

• Once the corporation is properly formed and operational, the total number of authorized shares can change as long as the corporation meets the legal requirements to do so. For example, Delaware Code Title 8 section 242(b)(2) states that when a corporation wishes to modify the number of authorized shares, the issue must be decided by the shareholders. Any proposed amendment to the number of authorized shares must be approved by a majority of the shareholders.
  
  

Other Considerations

• Though there is no clear requirement or guidelines about the number of authorized shares a corporation has to have, the number of shares a corporation decides upon can be influenced by a number of factors. For example, according to the Harvard Business School Blog, a Delaware corporation with 5,000 authorized shares or less only has to pay the minimum amount of state franchise tax. However, business start-up attorney Yokum Taku recommends companies begin with between 10 and 15 million authorized shares.