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What Do I Need to Know About Shares in My New Company?
Most new companies start simple: one share each for the founders, usually worth £1. It's only once dividends and tax planning come into the picture that people start asking about different share classes, and that's really a conversation for an accountant rather than a guess made at formation.
Key Takeaways
- A single share worth £1 per founder is the standard, simplest starting point.
- You can pay for your shares immediately, or offset them against money the company already owes you.
- Some companies issue different share classes (Ordinary A, Ordinary B, and so on) so dividends can be paid at different rates to different shareholders.
- Alphabet share structures like this need proper legal and tax advice, since HMRC can and does scrutinise them.
How Many Shares Should I Issue When I Form My Company?
Most new companies keep it simple: one share per founder, usually valued at £1 each. There's no requirement to issue more than that at formation, and plenty of companies never need to.
How Do I Actually Pay for My Shares?
You can pay into the company's bank account straight away, or, if the company already owes you money, say you've personally covered an early cost like business cards or a domain name, you can offset the share cost against that instead.
Why Do Some Companies Use Different Share Classes?
Emily Coltman FCA, a chartered accountant who's advised small businesses for years, explains that founders with different personal tax situations sometimes use different share classes so the company can pay dividends at different rates to each shareholder. For example, a company with two co-founders might issue an Ordinary A share to one and an Ordinary B share to the other, allowing dividends to be declared unevenly between the two classes.
This is sometimes called an alphabet share structure, and Coltman notes it genuinely can help two shareholders with different circumstances, one working full-time elsewhere, one working solely for the company, structure their income more efficiently. Her advice is not to set this up casually, though. HMRC can challenge these arrangements if they look like they exist purely to avoid tax rather than reflect a genuine difference in the shareholders' roles, so it's worth getting proper accountancy advice before structuring shares this way.
Where Can I Find Out More About Adding Shares Later?
Our guide to adding new shares and shareholders covers the process if you want to bring in more shareholders or issue additional shares after your company's already formed.
FAQs
How many shares does a new company need?
Just one per founder is standard, usually worth £1 each. There's no legal requirement to issue more.
Do I have to pay for my shares immediately?
No. You can pay straight away, or offset the cost against money the company already owes you.
Why would a company use different share classes?
To let dividends be paid at different rates to different shareholders, usually because they have different personal tax circumstances.
Is it risky to set up an alphabet share structure?
It can be, if HMRC decides it exists mainly to reduce tax rather than reflect real differences between shareholders. Get proper advice before setting one up.
This article is for general information only and does not constitute legal or tax advice. Share structures with tax implications should be discussed with a qualified accountant before you set them up.
