Let’s say I’m incorporating a new startup as a C-Corp with 10 million shares at a value of 0.001 per share. I’m incorporating a C-Corp because I’m planing to raise funds in the short term. Because I’m starting the start-up with my money and I’m planing to bootstrapping at least for 6 months, my question is about: in what moment I fund/inject the startup with my money? 1) Let’s assume I wanna own 60% of the start-up. Do I have to deposit $6,000 in the start-up bank account? 2) Assuming the (1) it’s correct. Let’s assume in the sixth month I need to inject more money to the start-up from my pocket again. What happen if I want to add more money to the startup? that shares change their value? Do you have any links for on-line courses or books about this topic?
The other answers are good, and here is one practical approach to handling this.
First, the accounting capitalization (10m x $0.001 = $10k) is really irrelevant. In fact, we went for 10m x $0.0001 = $1k. Whatever you pick, your company after formation will show $X of assets (the cash in the back) and $X of shareholder equity. So far so good.
You then need to start spending money through the company. Rather than issue more shares, you can lend the money to the company; write out a loan agreement (probably something like a balloon payment 10 years out with 0% interest) and deposit the check.
If you're doing everything at the same time, and want to have $1k of shareholder equity with a total of $25k to spend, then deposit the $25k check and call it $1k to purchase the founder's shares and $24k loan.
In this case, your company now has $25,000 assets/cash, $24k liability (to you) and $1k shareholders equity: assets = liabilities + shareholder equity.
Hope that helps clarify things a bit...
Answered 10 years ago
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