Starting a company: number of shares...

Hi All

I know when you start a limited company you need to have a certain number of shares in the company.

If you are the only person in the company effectively, then is there any purpose or reason to have anything other than something like 100 shares at £1 each?

What are the reasons why you might want more shares etc...

Thanks

Lianne

Re : Starting a company: number of shares

I believe the minimum number of shares you can have is 2, there is no maximum.

It is a good idea to split the shares in the company with say your wife, incase anything bad happens, like you get hit by a bus.

Having more shares is generally a good idea as the business expands, you could issue some to family or employees.

I would imagine there are tax reasons as well but I do not know them.
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Re : Starting a company: number of shares

Hi Lianne

Even for a small company that you don't intend to grow a lot can have good reason for a larger number of shares, for instance a couple of thousand pounds worth.

It all depends on what you will be doing.

If you are wanting to lease expensive equipment and so forth then the amount of share capital will be important - if problems hit your company and you are limited, then it is a real risk for others to loan you expensive equipment if there is no value or money inherent in the business.

That's just one reason why some companies have a larger share capital.

Chris

Re : Starting a company: number of shares

When setting up a company it is only necessary to issue one share. Chris is right when he says that it is generally a good idea to have a large number of authorised shares in the company (say 1000) just in case a new investor or partners joins.

An important destination should be made between shares which are authorised and those which are issued.

If, for example, 10 shares out of a possible 1000 are issued to a person, then they are said to have control of 100% of the limited company. They hold the entire issued shares capital of the company.

The remaining 990 are held by the company, in stock effectively.

In case (as sometime happens) all of the authorised shares are issued and the company wishes of distributes further units, a resolution must be passed in order for this to happen.

If there were available shares which could be distributed (990 in the example above), then there would be no requirement for the resolution as the company could just fill out a Form 88(2) and make the issue.
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Re : Starting a company: number of shares

Excellent follow-up post from Vicky there - hope all of this is useful Lianne.

As for Pete's suggestion that you share the shares with your wife, I think he might mean husband in your case

Chris

Re : Starting a company: number of shares

Hi,
The number of shares seems to be of little importance if it is your business and is going to stay that way. The only point is that the initial shares and their value is the start-up valur of the business. 1000 shares at £1.0 each mean a £1000 starting capital.

Regards
Gary
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