When filing articles of incorporation, you are authorizing the level of stock you believe will be issued over the next three years. Citron and Deutsch authorized 30 million common shares and 20 million preferred shares. Out of the 30 million common shares, we issued to the founders about 10 million shares of stock. There are several reasons to do this. The first reason is evaluation. Generally, a setup company is lower (for example, two million dollars). If the company has 10 million shares of stock issued and a two-million-dollar valuation, the stock will be twenty-cents a share. This price-per-share is more attractive to smaller investors, which are typically the first people dealt with by a new company. The second reason has to do with stock given through employment agreements. Instead of giving an employee a fuchsia as a stock, the employer might give one percent of the company, which will translate to a specific number of shares.

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