While registering a limited company with a companies house (or with our company formation service), you would often encounter the questions like what are company shares, what’s the value of each share, and what is share capital. If you’re not aware of them before, these questions can be confusing and intimidating as they are an essential part of company formation.
But you don’t need to be worried, as they’re not as confusing as they seem.
You might have overlooked this part during the initial stage of your business, but their knowledge is an unavoidable part of company formation. For this reason, we are going to explain them in simple language for your understanding.
For expert assistance, get in touch with our accountants.
What are Shareholders?
Shareholders are the owners of your company. It’s not necessary to be a director to become a shareholder. Every shareholder has specific voting rights. The more shares you own, the more rights you possess.
Now that you’re aware of the shareholders, let’s explore what are company shares.
What are Company Shares?
Shares determine what percentage of the limited company you own. Each share indicates a part of a limited company by shares. Every limited company must at least have a single share.
For example, if a company has only one share, owned by a single person. It means that the person has 100% ownership of the company. If there are two shares for two people, both would have 50% ownership of the company and this process goes on.
If a person contains more shares of a company, it means he/she contains more ownership. You receive trading profit based on the number of shares and their worth. They can be issued during the incorporation process of the company and afterward.
Shares have different types and most companies issue ordinary shares having equal value. The people who buy ordinary shares enjoy equal voting and profit rights. However, these rights may vary based on the share types and classes. At the end of the financial year, you can pay a nominal amount of shares in a limited company bank account.
What is Share Value?
Share value is the worth or value of any share. It is the money a shareholder invests in a share. This value differs from the nominal value of a share. While a company formation, a company doesn’t contain any value apart from the normal value of shares. When a company starts trading, the value of the shares also increases. This value of a share is called market value.
Curious to know what is share capital, let’s see…
What is Share Capital?
Share capital is the total value of shares that have been issued or invested by shareholders in a business. It is the capital made by a company through issuing shares. The share capital is owned by the company until its liquidation. That’s why it’s also called a company’s owned capital. It is one of the best sources of capital for joint-stock firms
For example, if the company issues six shares worth £5, the share capital of a company would be £30.
Types of share capital:
- Authorized capital
- Subscribed capital
- Unsubscribed capital
- Issued capital
- Unissued capital
- Called up capital
- Uncalled up capital
- Reserve capital:
- Paid-up capital
- Unpaid up capital
How We Can Help:
We hope you have got basic information on what are company shares, what is share value and what is share capital.
Establishing a business can be complex that requires legal and tax advice. If you are up for establishing a limited company, our limited company accountants will provide comprehensive insight to you.
Check out our company formation packages that cover all that you’re searching for.
For a customized package, feel free to reach out.
Disclaimer: This blog provides basic information on shares, share value, and share capital.