Cap Table

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,123 reviews

Jump to Section

Need help with an Investment Contract?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

What is Cap Table?

A cap table, formally known as a capitalization table, refers to a ledger used to assess and analyze a company's equity capitalization. The cap table lists all securities, including stock, warrants, and equity grants of a company. Such a capitalization also lists the owners of these company's securities.

Some of the everyday items in a company's equity capitalization include a company's percentage of ownership. In addition, the cap table may incorporate equity dilution and the actual value of equity.

A cap table often gives stakeholders a breakdown of a company's ownership. Also, the cap table helps indicate the distribution of a company's assets. Managing the cap table is essential for startups at the initial stages of development.

It's also a key indicator for more established companies who wish for a transparent organizational structure. For example, a company's cap table may include stock, convertible notes, and warrants issued to various shareholders.

Here's an article on what a cap table is.

What Does a Cap Table Look Like?

Cap tables often include lists of names or groups with stakes in the organization. Such titles include founders, investors, and familiar stakeholders. Again, the names are on one axis, and the details around each of those are listed.

The table also specifies what type of securities each of the individuals owns. Cap tables also indicate when each investor and founder first invested in the company on another axis. There's never a predefined template on what a cap table should look like.

The format and flow of a company's cap table depend on the company's stage of growth. It also depends on the ownership structure. You may manually create or use an automatic template when creating a cap table.

Here's an article on what does a cap table look like.

The Purpose of a Cap Table

There are many reasons why companies need cap tables. Here're some common reasons.

Decision Making

Among the many reasons, you need cap tables is to make better decisions. Therefore, companies must constantly create up-to-date cab tables that can help them develop accurate capitalization information.

Well-developed capitalization information helps businesses make fully informed and quick decisions. Typically, the decision-making process is often slower without a cap table and lacks a basis for justification.

Keep Track of Equity

At first, it may be easy to track equity during the initial stages. However, as the company grows and expands, it may become a reality that keeping equity can be challenging. In such cases, the role of a cap table is to keep track of equity.

Without proper and accurate recording, it's easy to have inconsistencies in the final presentation of equity. The cap table makes it easy for a company to keep track of all the equity and shares owned by all the company investors, founders, and stakeholders.

Saves Time

Nothing is more time-consuming than creating a cap table way into the company's journey. By the time a firm attempts to bring together information about the ownership of the securities, it may often be way later, with notable time lapses.

The consequence of such time lapse is often the need to spare additional time to bring together resources and time to gather and compute information related to stakeholders.

Defined Organizational Structure

Companies that have a cap table tend to have a defined organizational structure. The structure is easy for anyone who wants to learn more about the organization's stakeholders and shareholders. Further, having a clear cap table also helps identify how the company's ownership spreads across the proprietors.

It's a Legal Document

The cap table is critical, given its legal importance. In the United States, cap tables can be used as formal legal records to show equity ownership. However, they need consistent updating for these cap tables to be used.

When the cap table reflects stock ownership changes, it serves a critical purpose as a legally recognized document.

Here's an article on the purpose of a cap table.

Meet some lawyers on our platform

Gregory F.

4 projects on CC
View Profile

Michael M.

183 projects on CC
View Profile

Jose P.

1 project on CC
View Profile

Ryenne S.

143 projects on CC
View Profile

Who Needs a Cap Table?

Most companies grapple with this question. For startups, the cap table is typically one of the most important documents. Likewise, private companies often use the capitalization table to offer critical information to investors about the market value.

If you are a private startup, owning the capitalization table is useful. The table helps offer helpful information about the company's total market value. In addition, most corporations create cab tables to help ease the assessment of investment and shareholders in the company.

Often, investors want to see that companies are reserving enough equity before investing in such companies. Therefore, any organization that hopes to open doors for investors over time should consider creating these necessary capitalization tables.

Here's an article on who needs a cap table.

Cap Tables and Startups

For startups, managing the cap table is a matter of grave importance. It's amongst the best practices for a venture-backed startup. As startups prepare for a round of equity funding, they need to develop a deep understanding of the capitalization table.

It may be a far-fetched assumption that a company can access startup funding without a clear cap table. The good thing is that it's possible to present accurate equity capitalization tables for all to see with a lawyer for a startup.

Startups also need to keep updating the cap tables to reflect the changing dynamics in ownership and interests. Some startups go for the automated cap table software to help them keep tabs on the changes in ownership.

The need to maintain an updated cab table is also helpful towards ensuring that startups send certificates of ownership interest to new shareholders on time. Startups may also need to set up a structure to provide a quarterly and annual preparation of all the 409a valuation forms that would ordinarily affect the company's material valuation.

Here's an article on cap tables and startups.

Examples of Cap Tables

When creating a cab table, many factors come into play. You may need to include specific variables to help you fully capture your company's ownership. A great example of a cap table incorporates the following components.

Total of authorized shares

A good cap table should analyze the number of shares the company has authority to sell, and this is above the number of shareholders already on board.

Total of number of outstanding shares

The table should also indicate the number of outstanding shares held by the principal and medium-scale shareholders.

Reserved Shares

Reserved shares, also known as restricted shares, are another part of the cap table that's important. These reflect on the total number of reserved shares available to the employees.

What Do Investors Look for in a Cap Table?

Investors understand the obvious conspicuous indicators that a cap table presents. Such include the amount of stock raised and percentage ownership of equity. But beyond this basic assessment of the most common indicators, they also pay attention to some unique things in the capitalization table.

Breaks are among the most important factors that investors focus on when assessing the cap table. Page breaks are a red flag. Companies with lots of investors may be distractive. Page breaks often indicate more investors and can interpret as a potential risk.

Another factor that investors pay attention to is the loners. Investors may have second thoughts if the cap table shows clear signs of uneven equity distribution. Most investors like to see a complete team with notable long-term investments.

Here's an article on what investors look for in a cap table.

Our Commitment to Startups is our Unwavering Legal Support

When dealing with issues as complex and confusing as the cap table, it's so easy to get frustrated. You don't have to go through the complex process of creating and updating the cap table if you have professionals on board.

Our team of legal experts is always eager to help businesses looking for a lawyer for a startup to help with the cap table preparation and updating process.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Wendy C. on ContractsCounsel
View Wendy
5.0 (2)
Member Since:
January 18, 2023

Wendy C.

Free Consultation
5 Yrs Experience
Licensed in AZ, TX
Arizona Summit Law School

Business transactions attorney who is well-verse in general corporate matters, fundraising, and negotiation in technology, blockchain, and consumer product industry

Jonathan M. on ContractsCounsel
View Jonathan
5.0 (1)
Member Since:
January 19, 2023

Jonathan M.

Free Consultation
Charlotte, NC
13 Yrs Experience
Licensed in NC, SC, VA
Charlotte School of Law

Owner and operator of Meek Law Firm, PC. Meek Law Firm provides comprehensive business law representation, precise and informed representation for real estate transactions in the commercial and residential markets of North and South Carolina and efficient succession and estate planning for business owners and individuals.

Karen S. on ContractsCounsel
View Karen
5.0 (1)
Member Since:
February 1, 2023

Karen S.

Free Consultation
Atlanta, GA
12 Yrs Experience
Licensed in GA
Georgia State University

I'm an attorney available to help small businesses in Georgia get started with initial business set-up, required filings, tax strategies, etc. I'm also available to draft, review, and negotiate contracts. My experience areas include small business startups, information technology, technology innovation, real estate transactions, taxes, community associations, intellectual property, electrical engineering, the business of video game development, higher education, business requirements definition, technology consulting, program management, and the electric utility industry. I work part-time for a firm practicing community association law and part-time in my solo practice. I'm also an adjunct professor at Southern New Hampshire University teaching business innovation and business law. In addition, I'm part owner, legal counsel to, and a board member of a virtual reality video game development company. I am a member of the Georgia Bar Association. Please reach out if you need attorney, documentation or consulting help in any of those areas!

Christopher N. on ContractsCounsel
View Christopher
Member Since:
January 11, 2023

Christopher N.

Managing Partner
Free Consultation
25 Yrs Experience
Licensed in PA
Widener University Commonwealth School of Law

Christopher Nuneviller has practiced in the securities, venture capital, corporate and emerging business sectors, and as a contract-advisor to the federal government, a federal government senior level executive, and as Army Judge Advocate. Like you, he also he is a partner in other business ventures and faces the same pressure to succeed, be profitable, and stay sane, all while making his clients, employees, family and business partners happy. As the managing partner for Philadelphia's MNB Meridian Law, Ltd., his focus is on assisting small and mid-sized businesses grow and thrive. As a business generalist, Christopher provides advice and counsel to businesses, their owners, investors and shareholders on matters ranging from formation, organization, governance, routine and special operations, and growth toward IPO. Christopher is also a former U.S. Army Judge Advocate having served seven years in Washington, D.C. where he gained significant experience with "above the fold" matters of great import and an unhealthy insight into the internal workings of the "beltway" underbelly. Mr. Nuneviller is admitted to practice in the Commonwealth of Pennsylvania, and before the Supreme Court of the United States, the Court of Federal Claims, and the Court of Appeals for the Armed Forces.

Patrick N. on ContractsCounsel
View Patrick
Member Since:
January 19, 2023

Patrick N.

Attorney at Law
Free Consultation
6 Yrs Experience
Licensed in MA
Suffolk University Law School

Before attending law school, I had a prior career in business performance reporting. This experience differentiates me from other attorneys. I can readily read, interpret, and synthesize financial reporting. I also have a passion for legal research and writing.

Dayton M. on ContractsCounsel
View Dayton
Member Since:
January 18, 2023

Dayton M.

Free Consultation
1 Yr Experience
Licensed in WV
West Virginia University College of Law

Business Law - Criminal Defense - Immigration

David A. on ContractsCounsel
View David
Member Since:
January 24, 2023

David A.

Family Lawyer
Free Consultation
41 Yrs Experience
Licensed in FL
University of Florida

Graduated UF Law 1977. 40 years experience in Family Law/Divorce and Prenuptial Agreements. Rated "AV Preeminent" By Martindale Hubble, the oldest lawyer rating firm in the USA. Top 5% of attorneys in Florida as reviewed by Judges and other Lawyers (not client reviews). Personal prompt service and easy to contact--available 24/7. Good negotiator and very personable. My clients are my priority.

Judi P. on ContractsCounsel
View Judi
Member Since:
January 27, 2023

Judi P.

Free Consultation
New Mexico
3 Yrs Experience
Licensed in NM
Arizona Summit Law School

Driven attorney with a knack for alternative dispute resolution, real estate, corporate law, immigration, and basic estate planning, with superb people skills and high emotional intelligence, and for working smart and efficiently, as well as time and financial management skills to deliver excellent legal work and solutions to legal issues. Seasoned with 20+ years of law firm and legal experience (real estate/corporate).

Brittany T. on ContractsCounsel
View Brittany
Member Since:
January 27, 2023

Brittany T.

Free Consultation
9 Yrs Experience
Licensed in GA
Florida Coastal Law School

Brittany is an experienced attorney specializing in transactional and complex contract matters including but not limited to SaaS development and product implementation, technology/data agreements, licensing, and compliance. She has over 7 years of experience providing strategic legal advice to individuals and business clients of all sizes, from start-ups to large corporations. Brittany has a strong understanding of the legal issues related to technology and software and is well-versed in drafting and negotiating contracts ranging from software licenses to data sharing agreements. She is a highly-skilled negotiator and is adept at finding creative solutions to challenging legal issues.

Thomas G. on ContractsCounsel
View Thomas
Member Since:
January 27, 2023

Thomas G.

Real Estate Attorney
Free Consultation
7811 Montrose Road, Suite 500, Rockville, MD 20854
21 Yrs Experience
Licensed in DC, MD
University of Maryland School of LAw

Rene H. on ContractsCounsel
View Rene
Member Since:
February 7, 2023

Rene H.

Free Consultation
San Diego, CA
12 Yrs Experience
Licensed in CA
Northwestern University

and I am an attorney Licensed in California and Mexico, with over 14 years of experience. I have extensive experience working as an in-house counsel in executive roles in companies such as Anheuser-Busch, Campari Group, Grupo Lala as well as Tier 1 law firms.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call