Legal Question in Business Law in California

Re: value of securities sold on form 25102(f)

Well, it's some of both. The state's main concern is the prevention of fraud and minimizing investment risks to outside (non-promoter) investors.

If this is a one-owner corporation or a small close-knit group of insiders who know each other well, you can probably proceed as you seem to be proposing. In general, however, I counsel clients to use a thoughtful and realistic value-per-share in all stock-issuance transactions between the company and its founders or initial investors.

Don't confuse 'par' value with the working value placed on each share for bringing in capital, however. These aren't the same, and most new corporations use 'no-par' stock now.

If you have 5 million authorized shares and need to raise $1 million, you could assign a value of a dollar a share. Then, when you as founder put in $5,000, you would issue yourself 5,000 shares. When you've raised the $1 million (lucky you!), you will still have 4 million authorized but unissued shares for future needs (expansion, stock splits, options, etc.) without recapitalizing or restating your Articles.

If for some reason you want to issue a lesser number of shares to yourself for the $5,000, one possibility is to put in most of the $5,000 as a loan.

Don't do anything contrary to an existing corporate resolution! Corollary: Don't do anything with regard to funding or capitalization without an authorizing resolution, and if you ever do, get a ratifying resolution ASAP.

You probably need some legal coaching for this corporation. The individual officers, directors or investors may also require independent counsel.