I am an incorporating an S Corp based in Florida. Is there a tax / yearly fee implication based on number of authorized shares ?
Option 2 : 10000 shares with a par value of 0.1
I want to provide stocks/options to future employees. Please advise which is a better option. The company will be in incubation mode for 6-12 months
3 attorney answers
No, not in Florida. You should meet with a business and tax attorney to properly advised you as to future stock options and other employee benefits since properly structuring employee benefits and executive compensation can be planned to maximize tax savings.
As to your first question, the answer will depend on your state of incorporation. You have indicated that the corporation will be based in Florida, although you have not indicated a state of incorporation. For instance, if it was a Delaware corporation based in Florida, you would have to plan accordingly for the Delaware annual franchise tax.
As for your second question, it depends on your specific facts, circumstances, and plans, I can tell you I usually advise companies to authorize around 10 to 15 million shares of common stock. Around 8 or 9 million shares are issued to founders with a 1 million to 2 million share option pool, for a fully-diluted base of around 10 million shares. The remaining authorized but unissued shares are a reserve in the event more shares need to be issued. From a purely mathematical perspective, it doesn’t matter whether there are 10,000 or 10 million fully-diluted shares. However, when companies are granting options to new employees, even the smartest new employees feel better receiving options to purchase 100,000 shares as opposed to 100 shares, even if it represents the same percentage ownership of the company. Thus, without knowing your specific, facts, circumstances, and plans, option 1 is more in line with what I generally recommend.
Finally, I noted that you are making an S election. While I don't know your specific plans, facts and circumstances, please note that S corporations have various limitations, such as no entity shareholders and the inability to sell preferred stock to investors (as only 1 class of stock is permitted).
I suggest you engage an attorney to get your questions answered and go over your plans in more detail.