Cap Table Cleanup Scripts: Fixing Common Founder Mistakes
last updated: Feb 20, 2026
You messed up your equity distribution. It happens. But if you hide it, you become uninvestable. These scripts help you confess to investors and fix the damage before due diligence destroys your leverage.
TL;DR: The Executive Summary
If you are in a rush and need to fix a broken cap table immediately, here is the high-level view of what you need to know.
Cap table cleanup scripts are pre-written legal and communication templates designed to rectify equity allocation errors, missing tax filings, or mathematical discrepancies. Using these ensures you maintain credibility while fixing expensive mistakes.
How to read this: Use the scripts below to communicate with counsel/investors, but check the benchmarks first to understand the financial stakes.
Cap table cleanup scripts are pre-written legal and communication templates designed to rectify equity allocation errors, missing tax filings, or mathematical discrepancies. Using these ensures you maintain credibility while fixing expensive mistakes.
- Rule: The "Bad News First" Rule. Never let an investor find an error you haven't already disclosed.
- Warning: A missing 83(b) election is usually fatal to the founder's personal tax situation unless the equity is repurchased immediately.
- Quick fix: Use our Cap Table Template to spot errors before sending to legal.
How to read this: Use the scripts below to communicate with counsel/investors, but check the benchmarks first to understand the financial stakes.
Glossary
- 83(b) Election: A tax filing that lets you pay taxes on equity upfront at a low valuation. Missing this deadline (30 days hard stop) often results in a massive tax bill later.
- Dead Equity: Ownership held by founders or employees who are no longer contributing to the company. Investors typically tolerate very little dead equity (often <10%) before deeming a startup "uninvestable."
- Option Pool Shuffle: The negotiation of whether the employee stock option pool comes out of the pre-money or post-money valuation. Math errors here dilute founders significantly.
- Recapitalization: The legal process of changing a company's capital structure, often required to fix severe cap table issues.
How to use these cleanup scripts
Below are three specific communication scripts. Do not copy-paste blindly—fill in the bracketed data. These are designed to be sent to legal counsel first, then adapted for investors or co-founders.
Script 1: The "We Missed the 83(b)" confession
Context: You or a co-founder missed the 30-day filing window. You need to reset the stock issuance (re-purchase and re-issue) before the company value rises. See our detailed 83(b) Election Startup Script for the mechanics of the filing itself.
Subject: Administrative Correction regarding [Founder Name] Stock Issuance
Hi [Investor Name/Board Member],
During a routine internal audit of our corporate filings, we identified that the 83(b) election for [Founder Name] was not filed within the statutory 30-day window following the initial stock issuance on [Date].
To prevent significant future tax liabilities that could distract from company operations, we are moving to correct this immediately.
The Plan:
1. The Company will repurchase the unvested shares at the original issuance price.
2. We will re-issue the shares immediately.
3. [Founder Name] will file the 83(b) election via certified mail the same day.
This is a purely administrative reset. There is no change to the fully diluted cap table or ownership percentages. We have consulted with [Law Firm Name] and they have the paperwork ready.
Please confirm you have no objections to this administrative cleanup so we can execute and close the file.
Best,
[Your Name]
Script 2: The "Dead Equity" clawback
Context: A co-founder left early. They still own 20% of the company but aren't working. This makes you uninvestable. You need to negotiate them down.
Subject: Formalizing your transition / Cap Table adjustments
Hi [Ex-Founder Name],
As we prepare for our next phase of growth and potential fundraising, we are cleaning up the cap table to meet standard investor requirements.
Currently, you hold [XX]% of the equity. Since your operational involvement ended on [Date], market standard (and future investor demand) requires that we align equity with active contribution and forward-looking risk.
We cannot raise capital with [XX]% of the company held as "dead equity." It signals to investors that the active team is under-incentivized.
Proposed Resolution:
1. You retain [X]% as vested founder equity for your contributions to date.
2. The company repurchases the remaining [Y]% at par value.
3. We sign a mutual release of claims.
This allows us to preserve the value of the stock you do keep. Without this adjustment, the company is likely un-fundable, which would render your entire holding valueless.
Let’s get this signed by [Day of week] so we can focus on building value for all shareholders.
Regards,
[Your Name]
Script 3: The option pool math correction
Context: You promised an investor a 10% option pool but miscalculated the share count in Excel. Use a Seed Cap Table Builder to verify your numbers before sending this.
Subject: Correction to Capitalization Table - [Date]
Hi [Investor Name],
I am writing to flag a calculation error in the pro-forma cap table sent on [Date].
Specifically, the 10% option pool was calculated on a [Pre-Money / Post-Money] basis, but the formula in the spreadsheet did not correctly account for the [Convertible Note conversion / specific variable].
We have corrected the formula.
- Previous Fully Diluted Share Count: [1,000,000]
- Corrected Fully Diluted Share Count: [1,050,000]
This results in a minor adjustment to the price per share from $[X] to $[Y].
Attached is the corrected model. The economic impact is roughly [0.X]% and ensures we are mathematically compliant with the term sheet signed on [Date].
Apologies for the spreadsheet fatigue—we prefer to catch this now rather than in legal drafting.
Best,
[Your Name]
Script 1: The "We Missed the 83(b)" confession
Context: You or a co-founder missed the 30-day filing window. You need to reset the stock issuance (re-purchase and re-issue) before the company value rises. See our detailed 83(b) Election Startup Script for the mechanics of the filing itself.
Subject: Administrative Correction regarding [Founder Name] Stock Issuance
Hi [Investor Name/Board Member],
During a routine internal audit of our corporate filings, we identified that the 83(b) election for [Founder Name] was not filed within the statutory 30-day window following the initial stock issuance on [Date].
To prevent significant future tax liabilities that could distract from company operations, we are moving to correct this immediately.
The Plan:
1. The Company will repurchase the unvested shares at the original issuance price.
2. We will re-issue the shares immediately.
3. [Founder Name] will file the 83(b) election via certified mail the same day.
This is a purely administrative reset. There is no change to the fully diluted cap table or ownership percentages. We have consulted with [Law Firm Name] and they have the paperwork ready.
Please confirm you have no objections to this administrative cleanup so we can execute and close the file.
Best,
[Your Name]
Script 2: The "Dead Equity" clawback
Context: A co-founder left early. They still own 20% of the company but aren't working. This makes you uninvestable. You need to negotiate them down.
Subject: Formalizing your transition / Cap Table adjustments
Hi [Ex-Founder Name],
As we prepare for our next phase of growth and potential fundraising, we are cleaning up the cap table to meet standard investor requirements.
Currently, you hold [XX]% of the equity. Since your operational involvement ended on [Date], market standard (and future investor demand) requires that we align equity with active contribution and forward-looking risk.
We cannot raise capital with [XX]% of the company held as "dead equity." It signals to investors that the active team is under-incentivized.
Proposed Resolution:
1. You retain [X]% as vested founder equity for your contributions to date.
2. The company repurchases the remaining [Y]% at par value.
3. We sign a mutual release of claims.
This allows us to preserve the value of the stock you do keep. Without this adjustment, the company is likely un-fundable, which would render your entire holding valueless.
Let’s get this signed by [Day of week] so we can focus on building value for all shareholders.
Regards,
[Your Name]
Script 3: The option pool math correction
Context: You promised an investor a 10% option pool but miscalculated the share count in Excel. Use a Seed Cap Table Builder to verify your numbers before sending this.
Subject: Correction to Capitalization Table - [Date]
Hi [Investor Name],
I am writing to flag a calculation error in the pro-forma cap table sent on [Date].
Specifically, the 10% option pool was calculated on a [Pre-Money / Post-Money] basis, but the formula in the spreadsheet did not correctly account for the [Convertible Note conversion / specific variable].
We have corrected the formula.
- Previous Fully Diluted Share Count: [1,000,000]
- Corrected Fully Diluted Share Count: [1,050,000]
This results in a minor adjustment to the price per share from $[X] to $[Y].
Attached is the corrected model. The economic impact is roughly [0.X]% and ensures we are mathematically compliant with the term sheet signed on [Date].
Apologies for the spreadsheet fatigue—we prefer to catch this now rather than in legal drafting.
Best,
[Your Name]
Benchmarks: The Cost of Mistakes
Cleaning up a cap table isn't just annoying administrative work; it is expensive. Knowing the numbers helps you justify the legal spend to your co-founders.
1. Legal cleanup costs
If you let lawyers handle the communications and redrafting from scratch, legal cleanup costs typically range from $15,000 to $30,000. This often exceeds the cost of the initial incorporation itself. Fixing it proactively with the scripts below can cut this by 50%. Compare this to standard seed round legal fees which are often in the same ballpark.
2. Sample math: The 83(b) nightmare
Founders often ignore the 83(b) election because they don't understand the math. Here is the specific calculation of what happens if you miss the 30-day window:
1. Legal cleanup costs
If you let lawyers handle the communications and redrafting from scratch, legal cleanup costs typically range from $15,000 to $30,000. This often exceeds the cost of the initial incorporation itself. Fixing it proactively with the scripts below can cut this by 50%. Compare this to standard seed round legal fees which are often in the same ballpark.
2. Sample math: The 83(b) nightmare
Founders often ignore the 83(b) election because they don't understand the math. Here is the specific calculation of what happens if you miss the 30-day window:
- Scenario: You are issued 1,000,000 shares at $0.0001 (par value).
- Year 1 (No election): The company value grows. 25% of your shares (250,000) vest. The new fair market value (FMV) is $1.00/share.
- The tax bill: The IRS treats the difference between your purchase price ($0.0001) and current value ($1.00) as ordinary income.
- Calculation: 250,000 shares * ($1.00 - $0.0001) = $249,975 in taxable income.
- Result: You owe ~$100,000 in cash taxes immediately, even though you haven't sold a single share.
Comparison: DIY vs. legal cleanup
Founders often try to fix these errors themselves to save money. Here is why that is usually a mistake.
DIY cleanup
DIY cleanup
- Cost: $0 (initially).
- Risk: Extremely High. If you re-issue shares without proper board consent or valid consideration, the stock may be invalid.
- Outcome: Investors will likely force you to hire counsel to "fix the fix" during due diligence, doubling your costs.
- Cost: $5,000–$25,000.
- Risk: Low. Lawyers carry malpractice insurance; you don't.
- Outcome: You get a "Clean Legal Opinion" letter, which is often a closing condition for Series A rounds.
Risks
Ignoring cap table hygiene triggers three specific risks:
- The "Uninvestable" Tag: VCs see a messy cap table as a proxy for how you run the rest of the business. If you can't manage a spreadsheet, they won't trust you with $2M.
- Tax Audits (409A): Issuing options at the wrong price (below FMV) because of a bad cap table calculation can trigger 20% penalty taxes for your employees.
- Founder Disputes: Ambiguity is the enemy. If ownership isn't clear now, it leads to lawsuits when the company is actually worth something.
Will a clean cap table actually get you to $10k MRR?
No. A clean cap table is "table stakes." It doesn't win you the game; it just allows you to sit at the table.
You can have perfect execution on your 83(b) filings and a pristine option pool, but if your equity strategy isn't backed by a product people want, your probability of hitting $10k MRR remains near 0%.
A cap table is just a ledger of who owns the pie. If you don't validate your product and generate cash flow, you are simply fighting over 100% of nothing. Use these scripts to fix the mess quickly, then get back to selling.
You can have perfect execution on your 83(b) filings and a pristine option pool, but if your equity strategy isn't backed by a product people want, your probability of hitting $10k MRR remains near 0%.
A cap table is just a ledger of who owns the pie. If you don't validate your product and generate cash flow, you are simply fighting over 100% of nothing. Use these scripts to fix the mess quickly, then get back to selling.
FAQ
- You:Can I fix a missing 83(b) without repurchasing shares?Guide:Generally, no. The IRS is extremely strict about the 30-day deadline. If you miss it, the only clean "fix" is often to repurchase and re-issue the stock, assuming the company's value hasn't risen significantly yet. Consult a tax professional immediately—do not ignore this. Read more on Carta's guide to 83(b) elections
- You:How much dead equity is too much?Guide:Investors typically get nervous if non-operational founders hold more than 5–10% of the company. Significant dead equity reduces the pool available for future hires and investors, making the startup a risky bet.
- You:What happens if I don't tell investors about a math error?Guide:They will find it during legal due diligence. If they find it then, it looks like fraud or incompetence. If you disclose it now using the scripts above, it looks like an honest mistake you are responsible enough to fix.
No-BS guides
📉 Avg founder's probability: 12%
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You spent 5 minutes reading about tactics. Don't leave without checking if your current strategy can get you to $10K MRR in the next 90 days.