Untangling a Family Distributor's Paper Cap Table

Before comparing platforms, build a plain list: every physical certificate in the binder, its issue date if you can find it, and every verbal promise of equity that was made but never formally documented. This inventory is tedious, and it's also the only way to know what you're actually migrating, since neither Pulley nor Carta can reconcile shares that were never captured anywhere in writing.

Treat any verbal promise as unresolved until it's either formalized or explicitly declined, rather than assuming it will sort itself out once the company has real software. A recipient who was told years ago they'd get a stake, and who finds no record of that promise once the company digitizes, has a legitimate grievance that a platform migration alone won't settle.

Your plain-language inventory should capture:

• Every physical certificate in the binder, with its issue date if you can find it.
• Every verbal promise of equity that was made but never formally documented.
• Options granted along the way, such as those given to a warehouse general manager, and the strike price used.

A stock certificate that was handed over informally isn't automatically valid; whether it represents real, enforceable ownership depends on whether the board actually authorized the issuance and whether it was properly recorded in the company's minute book. Have outside counsel review the certificates against whatever corporate records exist before you load anything into a platform, since entering an invalid grant as if it were real ownership creates a much bigger problem down the line.

This review sometimes turns up gaps: a certificate for shares the board never formally approved, or an approved issuance that was never actually certificated. Either way, you want to know before migration, not after a new investor or lender asks for a clean cap table.

If the warehouse general manager's options were granted without a proper strike price tied to fair market value, that's a real compliance gap under Section 409A, not just a documentation nitpick. Both Pulley and Carta run in-house valuations that work for a closely held distributor with straightforward, predictable revenue, so this is usually the more standard part of the cleanup.

Bring the company's actual margin structure to the valuation conversation. A distributor's thinner margins compared with a software company can pull the valuation output in a different direction than a generic model would assume, so make sure whoever runs it understands the business you're actually in.

A relative who received a small gift of shares two decades ago and hasn't set foot in the business since is still a legal owner with the rights that come with it, voting rights, information rights, a claim on any future sale proceeds, whether or not the current management team thinks of them as involved. Confirm current contact information and get each holder to affirmatively acknowledge their stake as part of the migration, rather than assuming old records are still accurate.

A distributor planning a sale or a next-generation transition benefits from doing this work years ahead of the transaction, not during diligence when a buyer's team is the one asking the questions.

The distributor's controller, who earns around the national median wage of $83,680 a year for the role¹, has plenty of other close-of-month work without adding a manual re-keying project for decades of historical grants on top of it. Once the migration is done, build reconciliation into the normal monthly close instead of treating the cap table as a separate, occasional project.

A platform that sits untouched between annual reviews tends to drift from reality again, the same way the paper binder did, just more quietly.

Once the company's ownership picture is accurate, document how it got that way: which certificates were confirmed, which promises were formalized or declined, and who owns keeping the platform current going forward. A distributor that's been through this cleanup once has a real advantage the next time equity changes hands, a new grant, a family transition, an eventual sale, over one that lets the record drift again and has to redo the same archaeology from scratch.