Calculating And Issuing Shares of Stock

Illinois has some unique rules on authorizing and issuing shares of stock so be certain to read this entire page.

In order to properly complete your corporate documents, you will need to determine the number of shares of stock to be issued to the various shareholders. There is a distinction between authorized and issued shares. You can authorize more shares than you will actually issue with the difference being held in reserve for future use.

As a small business, most small businesses initially authorize either 1,000 or 10,000 shares of Stock. It is recommended that you do not issue all of such stock upon the initial issuance. Stock that is not issued is held in reserve. It does not determine percentage of ownership, but leaves additional stock in reserve in the event that you agree to add additional shares.

You can always amend your Articles of incorporation to authorize additional shares of stock, but this requires additional state filings and related fees.

In the usual situation, where there are three shareholders for example, each who own one-third of the stock of the Corporation, you should issue each shareholder an equal number of shares, for example 100 shares each, leaving 700 shares in reserve. Where percentage of ownership is more complicated, you should use the same general principals to calculate the actual number of shares to be issued. The main point being that it is advisable to leave shares in reserve.

Illinois bases initial franchise tax payment on the value received for the shares of stock that are initially issued. The total number of shares that you plan to issue must be stated in your Articles of Incorporation. Note that this may be fewer than the total number of shares that are authorized. The difference are held in reserve for future issuance. You must also state the consideration to be paid for the initial issuance of shares. The amount cannot be zero but the Board of Directors has latitude in setting the amount to be paid in to capitol for the issuance of the shares. The amount of consideration paid for the original issuance of shares is referred to as "paid in capital" You should consult with you accountant regarding the issue of paid in capital.

The minimum Franchise Tax fee is $25 where the consideration to be received for the shares is $10,000 or less. The documents included in your Incorporation Package assume the minimum franchise tax payment of $25.00 for a total filing fee of $175.00. If your consideration to be received for your shares of stock is in excess of $10,000, you should call the Department of Business Services to determine the amount of Franchise Tax due upon filing.

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