Authorization and issuance of equity (Share structure)
Share structure refers to the types and classes of equity shares (or membership interests if your company is an LLC) in your company. In corporate structures where different classes of equity are allowed (C-Corporations and LLCs), there can be two categories of equity: common equity and preferred equity. Preferred equity is designed to have preferential terms relative to common equity including a higher position on the company's capital structure, governance rights, protective provisions, etc.
For each class of equity there can be authorized stock (or interests) and issued stock (or interests).
Authorized
Equity shares that have been authorized have been approved by the board but have not necessarily been assigned to any person or entity yet.
Issued
Equity shares that have been issued have been assigned or sold to a particular person or entity. "Shares outstanding" is a phrase that refers to all of the shares that have been issued.
Getting Shares Ready for a Funding Event
Whenever a company authorizes addtitional shares it generally needs to file an amendment to its corporate documents on file with the state. In the case of the C-Corporation, it will need to amend its Certificate of Incorporation. When a company receives funding, it generally sells shares to the investor. If the company hasn't issued enough stock, it will need to amend its Certificate of Incorporation which can be time-consuming and costly.
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