Ownership basics
Authorized, outstanding, and fully diluted shares
Compare authorized shares, outstanding stock, granted awards, and unallocated reserves with a worked cap table example.
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Separate authorization from ownership
Authorized shares describe the number a company is permitted to issue under its governing documents. Outstanding shares describe issued stock still held by shareholders. Unissued authorization is not itself a holding, and it does not automatically belong in an ownership denominator.
Options and similar awards introduce another count: shares that may be issued under existing rights. A fully diluted cap table includes specified potential shares as well as outstanding stock. Cooley’s explanation of share-count terminology distinguishes authorization, actual issuance, and the fully diluted basis.
Work through one company’s share counts
Assume one common class is authorized for 15,000,000 shares. The company has 8,000,000 outstanding shares and a 2,000,000-share equity plan. It has granted 500,000 options from that plan, with no exercises, cancellations, or other securities.
| Measure | Shares | Calculation |
|---|---|---|
| Authorized class shares | 15,000,000 | Class authorization |
| Outstanding stock | 8,000,000 | Issued shares still outstanding |
| Unallocated plan reserve | 1,500,000 | 2,000,000 − 500,000 |
| Fully diluted, excluding reserve | 8,500,000 | 8,000,000 + 500,000 |
| Fully diluted, including reserve | 10,000,000 | 8,000,000 + 500,000 + 1,500,000 |
A founder holding 4,000,000 shares owns 50% of outstanding stock and 40% on the fully diluted basis that includes the reserve. Neither figure uses the 15,000,000 authorized shares as its denominator.
Distinguish the class limit from the plan reserve
The equity plan’s reserve and the share class’s authorization answer different questions. In the example, subtracting outstanding shares from authorization leaves 7,000,000 unissued shares, but that is not the same as 7,000,000 shares freely available for new promises. The company already has awards and a plan reserve to account for.
When constructing the fully diluted count, add granted awards and the remaining unallocated reserve. Adding the whole 2,000,000-share reserve and the 500,000 grants on top would count those grants twice.
State the basis with the percentage
Label a percentage with its date and denominator. A report might say “40% fully diluted, including the unallocated plan reserve, as of September 1, 2026.” That is more reproducible than an unlabeled ownership percentage.
Cap Table provides outstanding and fully diluted views with a pool control. SAFEs and notes remain separate until conversion. Financing agreements can define capitalization differently, so compare the actual definition with the report before using its denominator to price a round. Follow Read and export a historical cap table to select those controls.