A startup’s certificate of incorporation sets a fixed number of authorized shares, the maximum number of shares the company can issue. Founders typically set that number conservatively at formation. But a funding round, larger employee option pool, or new class of stock for investors can each require more shares than the certificate allows. To raise that limit, a corporation must file a certificate of amendment with the state where it is incorporated. For many startups, that state is Delaware.

Below, we’ll explain why startups increase authorized shares, what a Delaware certificate of amendment does, how the amendment process works, and what to check before you file.

Key takeaways

• A certificate of incorporation caps the number of shares a company can issue. Startups often reach that cap when they raise a priced round, expand an option pool, or create a new class of stock.

• A certificate of amendment is the document a Delaware corporation files with the Delaware Division of Corporations to change its certificate of incorporation, including its authorized share count.

• The process typically runs in this order: board approval, stockholder approval, drafting, filing, and payment of state fees. With written consents and expedited processing, it can take a matter of days.

• More authorized shares can raise a company’s Delaware franchise tax; the state prorates that tax when an amendment is filed partway through the year.

• Increasing authorized shares doesn’t dilute those of existing stockholders. Dilution happens when the company issues new shares.

Why do startups increase authorized shares?

A startup typically needs to increase authorized shares when it has to sell more stock or grant additional equity beyond the limits set in the certificate of incorporation. The number set at formation is often conservative. It’s common for startups to authorize 10 million shares at incorporation, in part to keep Delaware franchise tax manageable. However, once the unissued shares are committed, the company needs a higher limit.

For example, two founders might receive 8 million of those shares, and the company reserves 1 million for an employee option pool, the block of shares reserved for equity grants. That leaves 1 million shares. If investors in a priced round agree to buy 3 million shares, the company can’t issue them until it raises its authorized share count.

The limit also applies to different classes of stock. A company that authorized only common stock at formation has no preferred stock to sell, so creating that class for investors requires an amendment.

What does a certificate of amendment do?

A certificate of amendment is the legal document a corporation files with the state to change the terms stated in its certificate of incorporation. For a Delaware corporation, that means a filing with the Division of Corporations.

Delaware law lets a corporation use an amendment to increase or decrease its authorized capital stock, change the par value (the minimum price assigned to a share) of its stock, or create new classes of stock. The amended certificate can contain only provisions that would be lawful in an original certificate of incorporation.

A Delaware certificate of amendment changes only the articles it names. The state’s form asks for the article number and the article’s new text, and the rest of the certificate remains in effect. To change many provisions at once, companies often file restated certificates of incorporation. That document combines the certificate and its earlier amendments into one instrument and can amend the original certificate further.

What are the steps in the amendment process in Delaware?

To increase authorized shares, you must file a certificate of amendment. Here are the general steps for a Delaware corporation that has issued stock:

• Get board approval: Your board of directors must adopt a resolution that states the proposed amendment and declares it advisable. Directors can do so at a meeting or, if every director consents in writing, without one.

• Get stockholder approval: The amendment typically requires approval from a majority of the outstanding stock entitled to vote. If your company has more than one class of stock, a class whose authorized share count is changing also votes separately—unless the certificate of incorporation stipulates otherwise. Stockholders can often approve by written consent rather than at a meeting, but the company must promptly notify stockholders who didn’t sign. Your certificate, bylaws, or investor agreements might add other requirements.

• Draft the amendment: The certificate of amendment must state your corporation’s name, the article being changed, and the article’s new text. It also has to confirm that the amendment was adopted under Section 242 of the Delaware General Corporation Law (DGCL). An authorized officer must sign the certificate.

• File with the Division of Corporations: You can submit the signed certificate through the division’s document upload service or by mail, and a law firm or registered agent (the party designated to receive the company’s official paperwork) can file it for you. The amendment takes effect on its filing date unless the document names a later time, up to 90 days after filing.

• Pay the filing fees: The state fee to file a certificate of amendment is $214 for a one-page document as of August 2026, plus $9 for each additional page. The fee can be higher when the amendment changes the company’s stock.

Section 242 of the DGCL governs the approvals. With organized paperwork, the full process can take a matter of days. Delaware offers expedited processing in one hour, in two hours, the same day, or the next business day for additional fees. Standard processing times vary with filing volume.

What should founders consider before filing a certificate of amendment in Delaware?

Before you file a certificate of amendment, consider how the new share count affects your Delaware franchise tax and whether the amendment matches your cap table and approvals.

Franchise tax can increase with authorized shares

Delaware corporations pay an annual franchise tax, which is due with the annual report by March 1. The state provides two calculation methods, and a corporation can use the one that results in the lower tax.

The authorized shares method counts only authorized shares: $175 for 5,000 shares or fewer, $250 for 5,001–10,000 shares, and $85 for each additional 10,000 shares up to a $200,000 maximum. Under this method, a company with 10 million authorized shares would owe $85,165 for the year. With 20 million, it would owe $170,165.

The assumed par value capital method uses total gross assets, issued shares, and authorized shares, and it has a $400 minimum. This method can produce a far lower figure, but the tax can still increase after an amendment. For example, a company with $1 million in gross assets, 8 million issued shares, and 10 million authorized shares at a par value of $0.00001 would owe $800. With 20 million authorized shares and no other changes, it would owe $1,200.

An amendment filed partway through the year also changes the annual report. Delaware prorates the tax for each portion of the year, and the report must give issued shares and total gross assets within 30 days of the amendment. A franchise tax filing that doesn’t reflect the amendment can require correction.

Errors can create cleanup work in a future financing round

Investors typically review a company’s certificate and approvals before a financing round closes. Shares issued beyond the authorized limit are a defect under Delaware law that the company would have to ratify or ask a court to validate. You can reduce that risk by confirming these points with your board and legal counsel before filing:

• Share count: The new authorized number covers every share issued and every share promised, including option grants, the unissued option pool, and shares owed on conversion of other securities.

• Classes of stock: The certificate authorizes enough shares of each class, including enough common stock to cover the conversion of preferred stock.

• Approvals: The approvals match what the DGCL, your certificate, your bylaws, and any investor agreements require.

• Consistent numbers: The share numbers in the board resolution, the stockholder consent, and the filed certificate match exactly.

What are common reasons for a certificate of amendment?

These are common reasons a company files a certificate of amendment that increases authorized shares:

• Priced equity round: Investors buy newly issued shares at an agreed price per share. If the round requires more shares than the company has left, the company amends its certificate first—sometimes on the same day as the closing.

• Option pool expansion: A company that plans to hire employees can exhaust the shares it reserved for equity grants. A larger pool requires enough authorized, unissued common stock.

• New class of preferred stock: Investors in a priced round typically receive preferred stock with rights such as voting rights and liquidation preferences. The certificate must authorize the new class before the company can issue it.

• Conversion of earlier investments: When simple agreements for future equity (SAFEs) or convertible notes convert into shares in a priced round, those shares also count against the authorized total.

One financing round can involve all four, which is why a share count set conservatively at formation is often too small by the first priced round.

How does increasing authorized shares affect the cap table and existing stockholders?

By itself, increasing authorized shares doesn’t change ownership percentages on the cap table or dilute shares of existing stockholders. Ownership is measured against issued and outstanding shares, and an amendment raises the limit only on how many shares the company can issue later.

For example, a founder who holds 4 million of 8 million outstanding shares owns 50% of the company. If the company raises its authorized shares from 10 million to 15 million, the founder still owns 50%. If the company issues 2 million new shares to investors, the founder then owns 40%.

After the amendment is filed and new shares are issued, you’ll need to update your cap table in these ways:

• Record the new authorized share count for each class and the amendment’s effective date.

• Add each new issuance with the holder, share class, number of shares, price, and date.

• Update the option pool to show shares reserved, granted, and still available.

• Recalculate each holder’s ownership percentage.

• Store the filed certificate and signed board and stockholder consents with the company’s records.

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