In general, there are two kinds of stock in a corporation: common stock and preferred stock. Common stock is issued to founders, employees, consultants, and advisers. Preferred stock is issued to investors.

How do you allocate stock?

To keep an incorporation process simple, founders should allocate common stock to both themselves and to an option pool. Founders also may choose to issue super-voting common stock or Series FF preferred stock, which is typically issued to founders. Note that the issuance of supervoting or Series FF preferred can add complexity to the incorporation and ongoing management of the corporation. That highlights the importance of obtaining legal and tax advice in deciding whether these and other types of shares are worth the time and cost of establishing them.

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Disclaimer: LTSE is neither a law firm nor provides legal advice. Before making decisions on matters covered by this post, readers should consult their legal adviser.

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