Authorized shares is the maximum number of shares a corporation is legally permitted to issue under its certificate of incorporation. The ceiling is set at incorporation and amendable only through a charter amendment requiring board and stockholder approval, with standard practice being to authorize well above current issuance to provide headroom for future financings, option grants, and corporate transactions. It is the legal ceiling on share issuance, distinct from issued shares (actually issued) and outstanding shares (issued and not repurchased).
The structural layers of share counts:
An S Corporation is a US federal tax election that allows a domestic corporation or LLC to pass profits and losses through to shareholders. Named after Subchapter S of the Internal Revenue Code, the election is not a separate entity type but a tax classification that avoids the double taxation C-corporations face. S-corp status is subject to restrictions on shareholder type, count (100 maximum), and stock structure (one class only) that make it largely incompatible with venture-backed startups. It is a popular structure for small businesses with US-citizen owners and incompatible with the cap-table realities of most institutional fundraising.
The restrictions that disqualify most venture-track startups: maximum 100 shareholder...
A stock split is a corporate action that increases the number of outstanding shares by a defined ratio while proportionally reducing per-share value. A 10-for-1 split converts each $1 share into ten $0.10 shares, maintaining the same total market capitalization and ownership percentages, used at private startups to increase share counts before significant grants and at public companies historically to manage share price into a target trading range. It is an economically neutral action at the company level but has real practical impact on how the cap table looks, how share grants are sized, and how the stock is perceived by various stakeholders.
The mechanic of a stock split:
A vesting cliff is the minimum time period a person must remain with a company before any granted equity vests. Leaving before the cliff date forfeits the entire grant. The startup standard is a one-year cliff inside a four-year vesting schedule, applied to both employees and founders, and built into virtually every cap-table-tool default (Carta, Pulley, AngelList Equity).
In practice, the one-year cliff works as a binary test. An employee granted 48,000 options on a four-year monthly schedule vests zero options for the first 365 days. On day 366, exactly 12,000 options (25% of the grant) vest at once. From then on, the remaining 36,000 vest at 1,000 per month for three years. The cliff exists to protect the company and the ca...
A trade secret is confidential business information that derives economic value from secrecy and is subject to reasonable efforts to maintain that secrecy. Covered information includes formulas, processes, algorithms, customer lists, source code, manufacturing techniques, pricing strategies, internal documentation, and training methods. Trade secrets are protected under federal law via the Defend Trade Secrets Act of 2016 and under state law in essentially all 50 states, with protection lasting indefinitely as long as the secret remains secret. It is the IP category that protects much of what software companies create, and the protection most-overlooked by founders who assume their IP is automatically covered by some other cate...
A vendor contract is the binding legal agreement between a startup as buyer and a third-party supplier (vendor, contractor, or service provider). The contract covers the services or products provided, fees and payment terms, data handling and security, IP ownership (especially for work product), indemnification, limitation of liability, and termination. It is the contract category that quietly accumulates the fastest as a startup scales, and it is the one founders pay the least attention to until something goes wrong.
The categories that matter: infrastructure and cloud (AWS, GCP, Azure, Cloudflare, Vercel; typically click-through ToS with separate Enterprise Agreements at $250K+ annual spend); payments and money movement (S...
An acqui-hire is an acquisition motivated primarily by the target's team rather than its product, with the underlying technology typically wound down post-close. It is structured as a soft landing for the founders and a hiring shortcut for the acquirer that bypasses the cost and timeline of conventional recruiting. It is the most-common exit outcome for early-stage startups that didn't reach product-market fit, and a meaningful pattern in talent-constrained markets where senior engineering teams (engineering, design, or domain expertise) are hard to assemble.
The structural pattern: deal sizes typically run $1 million to $5 million per engineer for typical engineering acqui-hires (more for AI talent in 2024 to 2025, where individ...
An option grant is the formal board action of approving and issuing stock options to a recipient. It is documented by a board resolution authorizing the grant, a Notice of Grant delivered to the recipient, and a Stock Option Agreement specifying share count, strike price (set by the current 409A valuation), vesting schedule, expiration date, and option type (ISO or NSO). It is the formal transaction that converts an option-pool reserve into an actual employee equity grant, and the documentation must be correct or the grant's tax-favored treatment can be jeopardized.
The standard option grant process:
A business plan is the written document describing a company's business model, target market, competitive position, operating strategy, team, and financial projections. It's used to align stakeholders and guide execution. Modern startup business plans rarely take the form of the traditional 30 to 40 page document; they more often appear as a pitch deck, a one-page Lean Canvas, or a short narrative memo.
The traditional business plan, with its executive summary, market analysis, organizational structure, marketing plan, operations plan, and 3 to 5 year financial projections, originated in mid-twentieth-century corporate planning and remains the format banks and SBA loan officers expect. For startups, the format has shifted. Mos...
A balance sheet is the financial statement showing a company's assets, liabilities, and stockholders' equity at a specific point in time. Unlike the P&L and cash flow statements that cover a period, the balance sheet is a snapshot, and the fundamental equation Assets = Liabilities + Equity always holds (hence "balance"). It is one of the three core financial statements (P&L, balance sheet, cash flow) that together provide a complete view of financial position. Balance sheets are more important at later-stage and public companies than at early-stage startups, where most items are minimal and cash is the only meaningful asset.
The standard balance sheet structure:
Assets (what the company owns):
Current Assets (convertible to ca...