Authorized, Issued, and Outstanding

Very often we get questions from clients regarding “authorized” – “issued” – and “outstanding” shares and what the terms mean in the context of corporations and raising money. Below is a quick explanation of the terms; thanks for reading.

Authorized Shares means the total (read, total ever that could be) shares a Corporation can create or “cut itself into.”  If you imagine a pizza, Authorized Shares are like the total number of slices the pizza will ever be cut up into.  There is only ONE pizza, but the number of slices is up to you.   

Issued Shares means the total number of shares that the Corporation has given out to Shareholders, plus what it has set aside for an employee stock option pool, plus the shares that it holds itself as treasury stock (fancy for Shares that the Corporation owns).  Back to our pizza example: Issued Shares are like the total number of slices that the pizza is cut up into right now.  

Outstanding Shares means the total number of shares that are actually owned by Shareholders (specifically excluding treasury stock and stock option pool set aside).  In pizza, the outstanding shares are like the number of slices that are currently claimed by your friends – specifically not including slices the host is keeping for himself (treasury stock) or slices the host is saving for future guests (stock option pool set aside).

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