Shares are a unit of ownership in a limited company. Their function is to show who owns the company – and what percentage of the company’s capital each shareholder owns. So, for example, your company could be divided up into 10 shares, with each of your 5 shareholders owning 2 equal shares (or 20% of the company).
The shares you create during incorporation are known as ‘ordinary shares’ – there are other classes of share, which you can find out about here.
You can also change the allocation and classes of your company’s shares at any point by passing a resolution – find out more on changing share classes here.
How many shares do I need?
There must be at least one share (and therefore one shareholder) to meet the legal requirements when incorporating as a limited company – that’s the minimum number of shares.
There’s no upper limit on the number of shares you can have. But it’s common practice in many companies to have 100 shares. This has the advantages of being:
- A nice, round number that’s easy to work with.
- A simple way to work out straightforward percentages of share ownership.
- Limiting the company to 100 shares is also a good way to reduce risk for shareholders – the more shares a shareholder owns, the bigger their financial liability.
What will each share be worth?
Your shares must each have a nominal value. This is usually set at £1 per share – and there are couple of reasons why this makes sense to do:
- Making the value £1 makes it very easy to work out what’s owed if shares are sold or an existing shareholder decides to cash in their shares.
- Keeping the nominal value low helps to limit the financial impact for shareholders – the higher the value of each share, the bigger the financial liability becomes.
If you need help setting up the shares in your company, give us a call on 01454 300 999, or drop an email to email@example.com