I am going to start my tech company (private limited). The authorized capital of the company is $100K with 100k common shares ($1 per common share). I issued 10k common shares for me. Later, I got an investor who wants to pay $50k for 10% of the company's shares.
How many shares should I issue for this? And what percentage ownership will I have after this? Should I increase the authorized capital?
If the partner gets 10K shares for $50K and the founder has 10K shares then the partner is accounted as 50% of $150K. Percentage of un-issued shares is no problem to the partner because the partner now has 50% voting.
If the founder gets an additional issue of 10K shares and the partner gets 10K shares for $50K then the founder is accounted 66.67% of $150K while the partner is accounted 33.33% of $150K.
If the founder gets an additional issue of 80K shares and the partner gets 10K shares for $50k then the founder is accounted 90% of $150K while the partner is accounted 10% of $150K. Of course the business might have a business practice which produces upcoming and ongoing revenue and have value beyond liquid book value.
The founder could sell a percentage of their current holding but in that case the founder gets the money while the company doesn't get any additional funding.
I suppose, or obviously, it would be a breach of fiduciary duty to issue new shares for inadequate value when not negotiated with partners or shareholders.
