panicomg24 started this topic @ 18:54 on 23/12/2008
I have been developing an idea, for a business. After a lot of research and consultations, I think Ltd company is the way to go.
I will be the director/ceo (insert proper term here), I want to give my 2 sisters 1% each..
That is where the problem is.
How many shares should I issues at formation, some blogs say 100 @ £1 value, some say 1000, some say 10 000 000. There isn't a reliable figure.
For example if I issued 100 @ £1 would that mean the company is valued at £100, like wise £10m for 10m shares. That would just be out of context right?
What are the consequences of going with a certain amount of shares at incorporation?
Thank you
RE: Company formations, shares, directors & shareholders
Hira&Hira | 23/12/2008 08:47 PM
Hello,
The value of the share/amount of shares issues does not really contribute to the value of the business. The value of the business depends on many factors including cash flow, turnover, assets etc etc
Here is how you should do it :
Issue 100 Authorised Shares Capital at £1 each (this simply means the company has a maximum of 100 shares to issue)
Issue 8 Issued Share Capital to you (i.e. 98%), and 1 share to each of your sister (i.e. 2%). The remaining 90 shares are held aside in case you wish to issue them to to other investors in the future.
Doing it this way also has a benefit if the company fails. The director will be liable to pay a maximum of £8 (equal to 8 issued shares at £1 each) into the business (if not already done so), and the 2 sisters £1 each.
Hope this helps.
Hira&Hira
Business and Marketing Consultants
RE: RE: Company formations, shares, directors & shareholders
Anna Chandley | 14/01/2009 01:33 AM
With reference to the post by Hira & Hira. If you issue 8 shares to you and 1 share to each of your sisters they will own 20% of the company between them not 2%. It is the percentage of issued shares that determines the percentage of the company that a shareholder owns not the percentage of the authorised share capital.
In general it is best to issue as few shares as possible as extracting your original investment in a company in the form of shares is not easy or tax effective. Any additional funds required to start up the company can be in the form of a loan from you to the company. This loan can then be repaid to you without any tax consequences.
Most companies have a higher number authorised shares to allow for a further issue of shares in the future if necessary.
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Anna Chandley ACA CTA
Lewis Curtis Ltd
www.Lewiscurtis.co.uk
RE: Company formations, shares, directors & shareholders
panicomg24 | 23/12/2008 08:50 PM
so you mean by issuing 1000 shares at launch, the board is legally responsible for paying £1000 if the company fails?
RE: RE: Company formations, shares, directors & shareholders
Hira&Hira | 23/12/2008 09:58 PM
Yes, if you have 1000 Issued Share Capital at £1 each, the shareholders will be liable to pay £1,000 (if not already done so) into the business should it fail to cover its debt.
If the director pays for these shares (by investing the amount into the business at launch) he/she will not be liable to pay this again.
RE: Company formations, shares, directors & shareholders
The amount of shares you issue does not reflect the total company worth but shares available and held by each shareholder. If you are going to fund the business among the 3 of you then you can issue the shares according to the amount each one of you has contributed into the business in full numbers.
All the best in your new venture.
BrightStartUp Consulting
StartUp - Growth - Transformation
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BrightStartUp
Tel: 01233632356
http://www.startupresources.co.uk
STARTUP FUNDING,CONTRACTS,AWARDS,OFFERS DIRECTORY
http://www.brightstartupbusinessplan.com
BUSINESS PLAN SOFTWARE
RE: Company formations, shares, directors & shareholders
christov84 | 11/01/2009 10:31 PM
I think the nature of the problem comes from how you have valued the business.
The number of shares really isnt that significant. However I like to invest in companies that have lots of shares and thus a cheap entry point.
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Business Development, Sales & Marketing Consultancy,
RE: Company formations, shares, directors & shareholders
WisteriaFormations | 22/07/2009 11:09 AM
What you could do is talk to a company formation agency as you want to become a ltd company. They could provide the advice needed and other services for a small price obviously. Wisteria Formations can help you with this for just £24.99.
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http://www.wisteriaformations.co.uk - Ltd company formations from £24.99