The Firm: Economics, Accounting, and Capital Structure
The Firm
Economics, Accounting, and Capital Structure
Entity separateness, assets, liabilities, equity, authorized and issued shares, classes, options, dilution, and cap-table arithmetic.
Structured Visual
Jurisdiction: US; as of 2026-08-28; not legal advice; Render structure, refuse interpretation, cite, abstain, and hand off.
RENDER STRUCTURE · REFUSE INTERPRETATION · CITE · ABSTAIN · HAND-OFF: render structure, refuse interpretation, cite provenance, abstain when unsupported, and hand off to human review.
Scope and honesty note
Jurisdiction: Texas statutory anchors with United States business-associations doctrine explained comparatively; as of 2026-08-28; governing documents, facts, tax, securities, accounting, and jurisdiction vary; synthetic facts are classroom inputs; not legal advice. Render structure, refuse unsupported entity, authority, ownership, duty, liability, valuation, vote, or transaction conclusions, cite, abstain, and hand off.
See the essential structure first
Start with this deliberately incomplete structure, then use the pinned authorities, worked application, exceptions, and handoff below. This deliberately incomplete preview has 6 nodes; exceptions and legal consequences remain in the sourced prose below.
Jurisdiction: US; as of 2026-08-28; not legal advice; Render structure, refuse interpretation, cite, abstain, and hand off.
RENDER STRUCTURE · REFUSE INTERPRETATION · CITE · ABSTAIN · HAND-OFF: render structure, refuse interpretation, cite provenance, abstain when unsupported, and hand off to human review.
Begin with organization doctrine
A firm coordinates contracts, assets, governance, risk, and residual claims through an entity and human actors. Accounting equity is a residual record, not enterprise valuation. A cap table must distinguish authorized, issued, outstanding, treasury, reserved, option, warrant, convertible, and fully diluted assumptions. Percentage arithmetic depends on the denominator and governing rights. Limited liability separates many entity obligations from owner obligations, but the exact statute, personal undertakings, misconduct, and exceptional doctrines matter.
Authorized shares
Texas ties the number of authorized corporate shares to the certificate of formation. Verbatim statutory text: “Tex. Business Organizations Code Sec. 21.151. NUMBER OF AUTHORIZED SHARES. A corporation may issue the number of authorized shares stated in the corporation's certificate of formation. Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.” Source: Tex. Business Organizations Code § 21.151; https://www.neochart.com/catalog/texas/business_organizations/chapter_21/section_21_151/tex_bo_21_151_d0f3a16da0b0/tex_business_organizations_code_sec_21_151_number_of_authori_0001/index.html; data via neochart.com, snapshot 2026-08.
Owner-liability limits
The statute separates corporate obligations from shareholder liability subject to its precise provisions. Verbatim statutory text: “Tex. Business Organizations Code Sec. 21.223. LIMITATION OF LIABILITY FOR OBLIGATIONS. (a) A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate of such a holder, owner, or subscriber or of the corporation, may not be held liable to the corporation or its obligees with respect to: (1) the shares, other than the obligation to pay to the corporation the full amount of consideration, fixed in compliance with Sections 21.157-21.162, for which the shares were or are to be issued; (2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, beneficial owner, subscriber, or affiliate is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory; or (3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including the failure to: (A) comply with this code or the certificate of formation or bylaws of the corporation; or (B) observe any requirement prescribed by this code or the certificate of formation or bylaws of the corporation for acts to be taken by the corporation or its directors or shareholders. (b) Subsection (a)(2) does not prevent or limit the liability of a holder, beneficial owner, subscriber, or affiliate if the obligee demonstrates that the holder, beneficial owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate.” Source: Tex. Business Organizations Code § 21.223; https://www.neochart.com/catalog/texas/business_organizations/chapter_21/section_21_223/tex_bo_21_223_ff4c26aa325a/tex_business_organizations_code_sec_21_223_limitation_of_lia_0001/index.html; data via neochart.com, snapshot 2026-08.
Pin the synthetic organization record
A synthetic capitalization packet states four ledger rows and separately records charter authorization, issuances, class rights, vesting, options, warrants, conversion assumptions, entity assets, liabilities, and missing documents.
Work the organization application
The retained core computes the stated fully diluted denominator and Founder A percentage from ledger units. The trace does not treat reserved options as issued for every purpose or assume preferred converts without the stated scenario. It separates accounting identity from valuation and applies the liability statute only to the obligation and theory it addresses.
Reuse the cap-table computation
The retained core recomputes a fully diluted total of 10000 stated units and Founder A's percentage as 4000 basis points. This is arithmetic over synthetic ledger rows, not ownership, valuation, tax, or securities advice.
Read the populated organization record
The firm record contains entity, asset, liability, accounting equity, holder, class, authorized units, issued units, outstanding units, reserve, option, warrant, conversion assumption, fully diluted denominator, percentage, governing source, personal obligation, and review flag. The record contains 14 populated doctrine rows plus any retained computation.
Jurisdiction: US; as of 2026-08-28; not legal advice; Render structure, refuse interpretation, cite, abstain, and hand off.
RENDER STRUCTURE · REFUSE INTERPRETATION · CITE · ABSTAIN · HAND-OFF: render structure, refuse interpretation, cite provenance, abstain when unsupported, and hand off to human review.
Read the complete record
The complete record keeps sources, stated facts, and questions for review separate. Pinned sources: Verbatim snapshot authority. Tex. Business Organizations Code § 21.151: Authorized shares: Authorized shares. Tex. Business Organizations Code § 21.223: Owner-liability limits: Owner-liability limits. Synthetic organization: Classroom facts and records only. Ledger: Founder A has four thousand common units, Founder B three thousand, seed investor two thousand preferred, and option pool one thousand reserved units. Balance sheet: Cash and equipment are entity assets; vendor debt and note are entity liabilities; equity is residual accounting interest. Rights: Common, preferred, option, warrant, conversion, liquidation, voting, transfer, and vesting terms remain source-specific. Doctrine trace: Rule, actor, element, record, consequence, and handoff. Entity boundary: Entity assets and liabilities versus owner assets and obligations. Capital vocabulary: Authorized, issued, outstanding, treasury, reserved, option, warrant, convertible and fully diluted assumptions. Accounting: Assets equal liabilities plus equity as a record identity, not valuation. Cap table: Holder, class, units, issuance source, consideration, vesting, conversion ratio, denominator assumption, percentage. Dilution: New issuance changes denominators and relative percentages but does not alone state economic loss or legal injury. Cap table percentage toy computation: Query cap table percentage fully diluted shares; query words cap, table, percentage, fully, diluted, shares; query word count 6; jurisdiction US classroom business associations toy model; source type cap_table_math; Toy business-associations structure; not legal, tax, securities, valuation, or transaction advice; human review required. Model: Cap table percentage toy computation.; exact-citation lookup not requested; retrieval support count 2; abstention false. Retrieval scores are not legal authority. Founder A percentage: Founder A share count percentage toy computation review only.; citation Toy Governance Packet sec. 5(a); source Toy governance and cap table packet; jurisdiction US classroom business associations toy model; as of 2026-06-24; source type cap_table_math; word count 9; matches 1; score 1 of 6; filter match true; exact lookup match false; retrieval display rank 1; displayed excerpt Founder A share count percentage toy computation review only.. Option pool percentage: Option pool share count percentage toy computation review only.; citation Toy Governance Packet sec. 5(b); source Toy governance and cap table packet; jurisdiction US classroom business associations toy model; as of 2026-06-24; source type cap_table_math; word count 9; matches 1; score 1 of 6; filter match true; exact lookup match false; retrieval display rank 2; displayed excerpt Option pool share count percentage toy computation review only..
Narrow summary
State every capital assumption, recompute the ledger, and keep entity separateness, accounting, valuation, rights, dilution, and liability distinct.