<< Previous  |  Next >>

• Home

• How to Incorporate:

    - Contents

    - Section 1

    - Section 2

    - Section 3

    - Section 4

• Incorporating Forms
 
• Links to Other
  Incorporating Sites

• Glossary of   Incorporating Terms

• Email Us

Multiple shareholders
Issuing stock in a corporation with more than one owner can sometimes be tricky, especially if the percentage of ownership or consideration is unequal. Let’s take a minute here to talk about the different combinations and possible solutions. (Consideration is the money or property given for stock.)

For the purposes of these examples, let’s say that there are three owners (shareholders) in the corporation and 100,000 authorized shares of stock. Remember from the previous section, it’s a good idea not to issue all of your authorized shares so we won’t in these examples. Many readers that I talk with get caught up in the stock’s price per share upon issue. Don’t worry about the price per share. It doesn’t matter. Instead, concentrate on how much of the corporation each shareholder will own. The price per share will simply be a function of how much of the corporation the shareholder owns and the amount given for the stock. Price per share will be equal to the amount the shareholder gives for the stock divided by the number of shares they get.

Equal ownership / Equal consideration – This is an easy one. All three shareholders put in an equal amount of cash (the amount doesn’t matter) and will divide ownership evenly, one third each. To make the math easy, let’s issue each owner 10,000 shares of stock, leaving 70,000 shares unissued. A total of 30,000 shares (10,000 + 10,000 + 10,000) of stock will be issued. Let’s check our math, 30,000 total issued shares, divided by 10,000 shares issued to each owner equals .333 or 1/3 ownership each. Each shareholder will invest an equal amount of money, depending on how much money the corporation needs to start operations. To show their ownership, we’ll issue one stock certificate to each shareholder for 10,000 shares.

Equal ownership/ Unequal consideration – This is a typical example. People of different financial means often start businesses together. Some owners put in money, and some put in effort. This situation occurs when a certain amount of money is needed to start the business, and only one person can contribute it.

For this example, let’s say that $10,000 is needed to start the business. The best way to handle this is to have all three shareholders contribute the same amount of money for their stock, and the additional amount is given as a loan. Two of the shareholders will put in what they can, say $500 each. The third shareholder puts in $500 too. Now the business has $1,500 of the $10,000 it needs. The additional $8,500 needed will be loaned to the corporation by the third shareholder. The officers of the corporation will sign a promissory note guaranteeing payment of the $8,500 to the third shareholder.

Again, let’s issue each owner 10,000 shares of stock, leaving 70,000 shares unissued. A total of 30,000 shares (10,000 + 10,000 + 10,000) of stock will be issued. Let’s check our math, 30,000 total issued divided by 10,000 shares to each owner equals .333 or 1/3 ownership each. To show their ownership, we’ll issue one stock certificate to each shareholder for 10,000 shares.

Unequal ownership/ Unequal consideration – In this example there are three shareholders. Shareholder 1 will own 10 percent of the corporation, shareholder 2 will own 20 percent and shareholder 3 will own the remaining 70 percent. All we do here is simply issue the needed number of shares to each person, and adjust the consideration to match.

For example, lets issue 10,000 of our 100,000 shares to make the numbers easy to work with. We will give the first shareholder 1,000 shares, the second shareholder 2,000 shares, and the third shareholder 7,000 shares for a total of 10,000 shares issued. (1,000 is 10% of 10,000 and 2,000 is 20% of 10,000 and 7,000 is 70% of 10,000)

For consideration, the shareholders contribute $1,000, $2,000 and $7,000 respectively. If the shareholders don’t have that much money, they could contribute $100, $200, and $700 respectively. Still too much? Then let them contribute $10, $20, and $70 respectively. The amount of the consideration doesn’t matter as long as it makes the ownership percentages what we need them to be.

<< Previous  |  Next >>

		For custom printed stock certificates,
		visit CorporatePublishingcompany.com

  [ Home ]  [ How to Incorporate ]  [ Forms ] 
[ Links ]  [ Glossary ]  [ email us ]

[ Corporate Kits ]  [ Minute Books ]  
[ Corporate Seals ]  [ Embossers ]
[ Stock Certificates ]  [ Corporate Stock Certificates ] 
[ Blank Stock Certificates ]  [ Custom Stock Certificates ]
[ Downloadable Stock Certificates Software ]  [ Goes Stock Certificates ]   

Copyright © 2010 TheCorporationSite.com

incorporate, incorporation, incorporating, corporation, incorporate your business, articles of incorporation, incorporating in california, s corporation, incorporate online, business incorporation, incorporating, c corporation, incorporate in nevada, nevada incorporation, incorporating a business, ohio corporation, incorporate in Delaware, delaware incorporation, incorporating in nevada, ca corporation, how, how to, why, small business, stock certificate, llc, limited liability company, which is best, best state, reason to, offshore, yourself, advantages