Everything You Need to Know About the LLC Cap Table

A cap table for an LLC is a spreadsheet that provides information for a startup or other new firm.

A cap table for an LLC is a spreadsheet that includes all of the following information for a startup or other young business:

Common stock.

Preferred stock.

Warrants.

Individuals who possess stock.

How much these individuals paid for their shares.

A cap table is used to communicate the proportion of ownership each investor has in the firm. It also describes the worth of an investor’s assets and how much they dilution over time.

An LLC cap table may also be used to maintain track of other legal papers, such as:

Transfers.

Issues of stock.

Debt-to-equity conversion.

Cancellations.

Who Makes Use of Cap Tables?

The following sorts of businesspeople are the most likely to employ cap tables:

Entrepreneurs.

Investors in venture capital.

Analysts of investments.

Executives in the firm have been in charge of managing all paperwork and transactions from the company’s inception, therefore producing the cap table is often in their hands.

What Should You Include in Your LLC Cap Table?

Members of an LLC must produce a cap table before creating other business papers in the early phases of the firm’s creation. Most LLC cap tables are established after a few rounds of fundraising, when the funding sources grow complicated. This allows the firm to stay on top of new financing sources, initial public offerings, and any planned mergers or acquisitions.

The spreadsheet, in its most basic version, includes all shareholders and the number of shares they possess. However, for a more comprehensive paper, you may additionally include the following information:

Pre-money valuation refers to how much your firm is worth before any investments are made.

The price per share, or how much investors will pay for initial public offerings.

The post-money value is the pre-money valuation multiplied by the entire amount of investments.

Post-money shares are calculated by dividing the post-money value by the price per share.

Investor percent ownership is calculated by dividing the investor shares by the post-money shares.

Making Use of a Waterfall Analysis

A waterfall analysis determines how much each stakeholder would get if the company went bankrupt depending on the quantity of accessible stock. A waterfall analysis keeps you prepared since you never know when you may need to liquidate.

A waterfall analysis predicts how you will distribute revenues to your shareholders based on a number of assumptions. Cap tables are useful in a waterfall analysis since they show each shareholder’s accounting ownership. This is distinct from economic ownership, which is just the proportion of ownership that is accessible to equity.

How to Make Use of a Cap Table

Cap tables may be used by LLCs for a variety of purposes, including:

Raising capital from investors, as the cap table demonstrates how the firm is formed as well as previous funding rounds. Cap tables can often address investors’ queries and show them how their investments will affect other investors. The cap table also shows them where they will rank in terms of liquidity. Obviously, the higher on the list an investor is, the happy they will be.

Hiring personnel, as the cap table allows a firm to be open and honest with new recruits. Employees will perform better and be more inclined to remain with the organisation if there is this level of openness.

How to Design a Cap Table

First, you must decide on the design of your cap table. Choose a straightforward and structured style so that anybody unfamiliar with your company can identify who owns shares and how many outstanding shares are available.

Most LLCs develop cap tables that include all investors’ names along the y-axis and the kind of securities along the x-axis. Consider using a pre-made template that just requires you to enter specified numbers and information.

In the first row, include the total number of shares held by the corporation. Following that, you may enter the following details:

Authorized shares are the number of shares that your firm may issue.

Outstanding shares are the number of shares that your shareholders now own.

Uninsured shares are the number of shares you haven’t issued yet.

Shares for stock option schemes, or shares saved for future workers.