Your business is growing and you need some financing to scale. Perhaps you’ve raised a bit of money from friends and family and you’re now ready to approach angel investors or VC firms. After you’ve gained some interest, someone asks you for your current cap table at which point you realize, you don’t have one yet…

A cap table (or capitalization table) is basically a document that breaks down the ownership of your company. It typically resembles a spreadsheet, outlining who owns how many and what type of company shares. If you’re the sole shareholder of your company, your cap table may have one line showing you as the 100% owner of all issued common shares. Complex cap tables can have multiple shareholders with different classes of shares and option pools.

Potential investors will want to understand who owns your company and the extent of the decision-making power of the shareholders. For example, if your parents own a percentage of the company but are not active in the business, investors may want to see that they own a class of shares that limit their decision-making. Drafting an initial cap table, no matter how simple, is an important step to solidifying the relationship of the shareholders with the company.

In established or funded companies, the corporation’s legal team may draft and maintain the cap table throughout the year. For start-ups with limited resources, you may decide to maintain the cap table on your own in a simple spreadsheet. Note that from a tax perspective, shareholders that own more than 10% of common or preferred stock have to be listed on the company’s tax return so your accountant will typically use your cap table to put together the annual tax filings. From a legal perspective, you’ll want to make sure that you have official share registration documents to verify that shares were in fact issued to the shareholders listed in your cap table. Note that these legal documents generally aren’t filed with any regulatory body like the CRA but are important to draft as they’ll serve as the official ownership documents for your shareholders while you can think of the cap table as the overall summary.

While it may seem trivial to start a cap table when you’re only a team of one, if you’re organized from the outset, you may be surprised as to how quickly your table begins to fill up.