In this concise video, Evan Carmichael answers a viewer’s question about how to price shares when forming a company and preparing for future investors. He explains that the number of authorized shares and their nominal initial price are largely irrelevant; what truly matters is the ownership percentage each shareholder holds. Because a private company’s shares are not publicly traded, the initial dollar value can be arbitrary and can change dramatically when an investor comes on board. Carmichael stresses the importance of involving a lawyer (and an accountant) early to draft a solid shareholders agreement. He outlines essential clauses—shotgun, piggy‑back, and right of first refusal—that investors expect and that protect both parties. For founders on a tight budget, he suggests using an online template for the agreement and then having a local attorney review and customize it, noting that a robust agreement signals diligence and reduces future headaches. The video concludes with a call for comments, questions, and subscriptions.
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How much should I price my shares at? So I got a great question from one of my YouTube viewers, love you guys, Hossein, to write in to say, "Great video Evan, I'm learning so much from you." Thank you Hossein. "Also please explain how shares are created in terms of initial value and the part left for future investors. How much should the initial price be? Is it good to have low or high? And do I need an attorney from the beginning?" So all great questions, especially if you're looking at bringing on investors in your business. When you're first starting your company, If it's a sole proprietorship, then there are no shares. If you are forming a company, then you have to create shares in your business. How many shares and what the initial price is doesn't really matter. It doesn't matter. It's more about the percentage. So if you're the only owner in the corporation, you own 100% of the shares, whether it's 100 shares, 1,000 shares, 10,000 shares, doesn't make a difference. You own 100%. Then what makes a difference is the percentage. Okay. The value, also doesn't matter at the start. The difference in the value that, that really makes an important impact is what you sell it at, right? So if you're gonna bring an investor on board at some point with your business, it doesn't matter what you initially price the share at. This is not a publicly traded company. This is your own business. Nobody even knows what the initial price was sold for, but it doesn't matter. It's more whatever deal you can come to between yourself and the investor. So if you sold the share to yourself, You know, if it was a dollar valuation at the start, that's fine. It doesn't mean you can't sell that same share for $100,000 later. The pricing doesn't matter. Okay. Should you involve a lawyer from the beginning? Yeah. Uh, just like it's good to have an accountant from the beginning. I know it's expensive and there are ways around it. One example could be to get a template online. Like if money's really important to you, you're really tight, You can buy an online template for shareholders agreement and the share structure, then just have a lawyer, local lawyer, review it. So they're not drafting everything, but they're just reviewing a current one and updating it for you. It's important to have a really good shareholders agreement. Okay? You want a lawyer to help you out with that at the beginning, because from an investor point of view, I've looked at businesses and if they don't have a solid shareholders agreement, I'm out. I'm not investing in that business. It's one, you know, reducing headache on my end, but also, you know, if the person, the entrepreneur, has thought that far ahead or not, right? Like, it's just a sign of how detail-oriented you are and how much you care about your business. If you don't even have a solid shareholders agreement, then there's probably a lot of other things wrong with your business as well. It's a warning sign. So you want to make sure you have your shareholders agreement set up. Some of the things that they'll look for is a shotgun clause. I think I mentioned on the video, right? I want a shotgun clause so that if I have an exit, right? I have an exit from the business. I have a piggyback clause so that if, if you sell the company, they have to buy my shares as well. Whoever's buying it over, at least I have that option. Or right of first refusal, so that if you sell your shares to somebody, I have the right to buy it first at whatever price before you sell it to somebody else. So all these things are part of a good shareholders agreement that a lawyer can help you go through. I would definitely recommend having a lawyer from the start, but again, if you can't afford it or you're worried about the pricing of it, then get an online agreement, but still have your lawyer review it before you create your agreement, because this is, this is important. And once you bring on investors, it's harder to change everything around in the future. So you want to start this part solidly from the beginning. And yeah, it doesn't matter what your initial share price is. If if you're the only person in the business. You can sell it later for whatever you want because it's a private company. Believe. Hopefully I answered your questions. A little bit technical maybe. You guys like this video though? Give it a thumbs up below. Makes me want to do more videos for you. And let me know what you think. Leave a comment below if you've had experience with shareholders agreements or bringing on investors, problems good or bad, I want to hear about it. Leave it below in the comments. You can ask me a question, I'm gonna give you the reply. And you want to see more videos like this? Click on my face, subscribe to the channel. Thank you so much. I'll see you soon.
