How many shares should I issue?
How many shares do i need ?
Everyone may have a different opinion on how many shares you need to issue when you think about incorporating your limited company.
To decide on the number of shares you need to think about the future, do you plan on selling shares in the future or bring in more investors in the future. The decisions you make now could have a big impact on raising finance, the legal structure and ownership of the business, and the dividend payment and who is liable if the company fails or is insolvent.
The minimum you have to issue is 1 during the formation. If there is more than one shareholder you will need to issue at least one share per shareholder.
If you only issue one share, then that means the shareholder owns 100% of your business and controls your business, but you can’t divide up one share and then have to consider issuing new shares which is a lot more complicated – it is easier to get it right from the beginning.
We would suggest issuing 100 shares, this allows you to transfer shares to other people, either by selling them or rewarding shares to staff or family.
Paying for shares?
When you start the business up, you don’t have to pay for the shares – the amount is just a nominal value. The only time you would need to pay for the shares is during the winding up of the company or insolvency. If you are creating shares to raise capital, you would normally pay for them when the shares are issues, the payment of the shares is made into the companies own bank account and recorded in the accounts.
How many shares would you suggest issuing on formation?
We would suggest leaving the share price as a £1.
So based on our suggestions of 100 shares at £1, the most you would have to pay if the company is wound up is £100.
In the past, we have had clients putting down large amounts of shares for £100 a share, not realising that they would be financially liable for this.
If the company is wound up, if the share is paid for, no additional payments are due, if the shares are unpaid for, then the nominal value must be paid.
So as part of your business planning, think about the ownership structure of your business and plans to raise finances in the future, or bringing in outside investors, as this will affect your number of shares.
Title:How many shares should I issue during formationSummary:
This brief article covers how many shares you issue dui=ring formation, what you need to think about in the future and how the shares are paid for.