Let’s start with an assumption: You are forming a company with the intention of obtaining venture financing within a year. (I will hold aside the probability of such a thing actually occurring.) If you followed my posts on Delaware franchise tax and par value you know that the number of shares you pick can affect your franchise tax – but it is not likely to have much of an effect if you use the so-called alternative calculation. Let’s also be clear with one definition. "Authorized shares" are all the shares a company may issue – not just the ones that are issued and not just the ones that are not issued. "Authorized shares" are all the shares.

One approach to the issue of how many shares could be to pick a number that kinda – sorta – looks like what you might have in the case of a venture financing. That might be something like ten million. When you have a large number of authorized shares, you can have a large number of issued shares and a large number of options.

Another approach might be to pick a small number to minimize franchise tax (under the basic calculation) and deal with changing later when you get financing. BTW, making a change in the authorized shares early in the life of a company is very straight forward. A stock split authorized by the holders of a majority of the shares is all that is needed.

Different strokes for different folks, but despite the fact that what is important is the percentage and not the number of shares, it sounds chintzy to give a new employee an option to buy one share – compared to, say, an option to buy 100,000 shares. Perception has a value. For this reason, despite the fact that it has no substantive effect on anything, most of my clients pick big numbers for authorized shares.