Shares of a corporation in Canada Many young and beginning entrepreneurs might find everything related to the shares of a corporation too complicated or requiring expert knowledge in order to use shares properly as a tool supporting business development of their businesses. This is not the case. Shares represent a portion or a “share” of the ownership of an individual in a corporation. Each share can bear one or more of the privileges (rights) attached to it - control, dividends and equity and while the total combination of all shares of each corporation in Canada must contain all three privileges, they might be distributed among different classes of shares. “Control” represents the power of a shareholder to elect directors and to control operations of a corporation through such directors. Additionally, shareholders might decide to dissolve (kill) a corporation. There are no other effective means of control owned by the shareholders. “Dividends” represent the right to participate in the profits of a corporation. This is one of the major tools to assist business owners in soliciting investors and compensating individuals assisting in such areas as business development, sales and marketing. “Equity” represents the percentage of ownership of the actual value of the corporation (equity - how much your company worth). But it will be used and benefited from only in one of two situations - sales of shares to a third party or sale of the corporation and distribution of the proceeds. When starting any business, entrepreneurs should remember that a corporation is authorized to issue only those classes and types of shares that had been defined within the Articles of Incorporation. The only workaround possible, is to apply for amended articles where such classes will be redefined - the costs of application would be similar to a new incorporation. That is why it is important to define more than one class of shares when approaching your initial incorporation. And the most important part - you must consult a legal and corporate tax professional when approaching the task of defining and issuing shares of your corporation. There might be multiple (and sometimes unexpected) taxable outcomes when we issue new shares in a corporation. We at CBES provide business owners and entrepreneurs with advice and professional services covering all legal, administrative and accounting needs of a corporation, and will gladly assist you in creation and issuance of various classes and types of shares to support your business development and growth. Our website - cbes.ca/ Facebook - facebook.com/CanadianBiz LinkedIn - www.linkedin.com/company/cbes All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES - Canadian Business and Enterprise Services does not offer legal advice online or on its TH-cam channel. Please consult a professional before you act in reliance on the information contained in our videos. #sharesofacorporation #corporationcanada #incorporationcanada
I want to say, thank you so much. This has saved me so much time and headache, having all the information right here in one channel. Thank you thank you! - Jack
Good evening, I have been watching most of your video and they are very useful and thank you for sharing such important information. I do have one question to ask though: I have a very close family and we are on the process of opening business. My question is do you advice as about opening the business as corporation or partnership and which way is better to pay less tax?
Thank you very much for the informative and useful video, could you please let me know in case of incorporation with a family business purpose with 2 incorporators, do we need to define the percentage of shares for each incorporators (shareholders)? or it is understood as 50/50 by default?
Some good information in there. I was curious about how when you create a company and own 100% of the shares... how you sell some of your own shares to raise operating capital. If I sell 10% of my shares to a person - that money goes into my pocket not the business... so how does that money go into the business? Do I personally "loan" the money to the company so it debits Assets and credits Owed to shareholders?
David, I think we've discussed it in person already, so I will answer for others to see. You have 2 options - 1. corporation issues new shares to the partner. In this case, the funds are injected directly into the corporation and could be used by it for any purpose. 2. You sell a portion of your own shares, in which case you have to be careful since first of all, you will generate a personal income subject to a tax. Then you can advance the funds to the corporation as a SH loan. In this situation, you might be able to draw the funds back from the corporation tax free in the future as a loan repayment.
Ganesh. I am actually preparing something similar - Financial relations between shareholders and a corporation. It is less directed to what is better, and more towards which options exist. Advantages could be different depending on your personal situation, alternative sources of income and more - this is something for an accountant to suggest.
I like your videos , very helpful information. I have some questions to ask ,1. i want to start online and whole sell business with my sister as a share holder so how do i register the company? Is it the business name as private federal corporation? I'm confused how to register the business based on shares, i hope to get the answer thank you
Dear Naima, these are important questions, which I think would be better to discuss over the phone. please email me at info@cbes.ca and I will schedule a short phonecall for us to discuss. In general, the logic of incorporation is reverse - you first incorporate, and then structure the shares and distribute them among your partners, family members etc. Also - federal incorporation, is not just "name", it includes drafting shares provisions, appointment of directors and officers of the corporation, and more.
Hi Eugene, Thank you very much for this video I have one question please can a corporation (One Person Company sole owner sole shareholder) issue dividends (pay myself dividends) the articles of incorporation have this wording in box #3 "The corporation is authorized to issue an unlimited number of common shares". if YES thank you if No can I amend it ? Thanks again Please please comment
@Business in Canada- Do it Right! Thanks for this informative video. Currently, me and my friend are developing an internet-based product. Occasionally we might need 3rd party investor to scale our online business. I have one question which I cannot find it anywhere While incorporating online for federal. Once I insert my text(defining COMMON SHARE TERMS, and PREFERRED SHARE TERMS) to the classes of share. I am confused as there is no section where I map the amount of share to a person or even define shareholder or is it a separate process that will begin after receiving a certificate of incorportaion?.
Sarabjeet, this is the main difference between making it yourself or using a specialist - we know how to define better and more diverse classes of shares. With regards to the articles - you only provide provisions for different classes of shares, the remaining part of issuance, distribution etc. is done by the corporation through its board of directors. What you have to keep in mind is that a corporation can only issue those classes that were defined in the articles.
Mary, I purchase mine from ES Services Corp., but you can buy from other providers as well. Essentially, you can even use a simple PDF file to create the certificate since there is no standard form of the certificate under the law...
Dear Sir, The video is very knowledgeable Can you please brief does any non-Candian ( Pakistani ) become a director on common shares basis with a Candian director. will be very thankful for your guidance Thanks
Hi, it is a good question. Overall, a non-resident can be a shareholder and a director of the Canadian corporation along with one additional director who is a PR or citizen. You do not have to allocate shares/equity to that director, so that 100% of the shares are owned by the foreign resident.
Hi Eugene, thank you for very informative video. I want to set up my own federal corporation. it is basically a one man corporation. can I be the sole share holder (100% common shares), sole director and sole officer?
Mina, overall - YES. A canadian corporation could have one person as its sole shareholder, director and officer at the same time. No limitations (subject to you being a local resident).
How many shares would you recommend to issue for a small corporation i we issued 1000 shares because we felt it would be easier to manage and less overwhelming are there any disadvantages to this?
1,000 is what I usually suggest. It allows to split up to 0.1% of the corporation without splitting the shares. In a small private corporation i do not see why you need more. another question is the classes of shares, these i usually suggest to have at least 3...
hi ..is it compulsory to mention names of all the members of the board in the article of incorporation?? and if there is a single director in the company then can he sell his shares to someone else and does he need any permission from any other to sell his shares???
Hi NC. There is a bit of a confusion in your question, I'll try to clarify the issues: 1. All those acting as directors of a company are listed in the public registry - this information is publicly available. 2. Shareholders on the other hand is a confidential information, which is being provided to the CRA for tax purposes only. 3. Not all the directors must be shareholders. These are two separate positions. 4. Every shareholder can sell their shares to any third party and by law no permission is required. Usually, in small corporations this power is limited through a shareholders agreement. I hope this clarifies the situation.
:-) Nowhere! This information is confidential and is not being posted on a public databases. You can only see the directors and officers of a corporation. If the owner of a corporation agrees to provide you with their T2 - you can see Schedule 50 to find that information.
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Shares of a corporation in Canada
Many young and beginning entrepreneurs might find everything related to the shares of a corporation too complicated or requiring expert knowledge in order to use shares properly as a tool supporting business development of their businesses. This is not the case.
Shares represent a portion or a “share” of the ownership of an individual in a corporation. Each share can bear one or more of the privileges (rights) attached to it - control, dividends and equity and while the total combination of all shares of each corporation in Canada must contain all three privileges, they might be distributed among different classes of shares.
“Control” represents the power of a shareholder to elect directors and to control operations of a corporation through such directors. Additionally, shareholders might decide to dissolve (kill) a corporation. There are no other effective means of control owned by the shareholders.
“Dividends” represent the right to participate in the profits of a corporation. This is one of the major tools to assist business owners in soliciting investors and compensating individuals assisting in such areas as business development, sales and marketing.
“Equity” represents the percentage of ownership of the actual value of the corporation (equity - how much your company worth). But it will be used and benefited from only in one of two situations - sales of shares to a third party or sale of the corporation and distribution of the proceeds.
When starting any business, entrepreneurs should remember that a corporation is authorized to issue only those classes and types of shares that had been defined within the Articles of Incorporation. The only workaround possible, is to apply for amended articles where such classes will be redefined - the costs of application would be similar to a new incorporation. That is why it is important to define more than one class of shares when approaching your initial incorporation.
And the most important part - you must consult a legal and corporate tax professional when approaching the task of defining and issuing shares of your corporation. There might be multiple (and sometimes unexpected) taxable outcomes when we issue new shares in a corporation.
We at CBES provide business owners and entrepreneurs with advice and professional services covering all legal, administrative and accounting needs of a corporation, and will gladly assist you in creation and issuance of various classes and types of shares to support your business development and growth.
Our website - cbes.ca/
Facebook - facebook.com/CanadianBiz
LinkedIn - www.linkedin.com/company/cbes
All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES - Canadian Business and Enterprise Services does not offer legal advice online or on its TH-cam channel. Please consult a professional before you act in reliance on the information contained in our videos.
#sharesofacorporation #corporationcanada #incorporationcanada
I want to say, thank you so much. This has saved me so much time and headache, having all the information right here in one channel. Thank you thank you!
- Jack
Super helpful! Thank-you!
Good evening, I have been watching most of your video and they are very useful and thank you for sharing such important information. I do have one question to ask though: I have a very close family and we are on the process of opening business. My question is do you advice as about opening the business as corporation or partnership and which way is better to pay less tax?
Thank you very much for the informative and useful video, could you please let me know in case of incorporation with a family business purpose with 2 incorporators, do we need to define the percentage of shares for each incorporators (shareholders)? or it is understood as 50/50 by default?
Mindbuildingsolutions approved!
Excellent video and content.
Some good information in there. I was curious about how when you create a company and own 100% of the shares... how you sell some of your own shares to raise operating capital. If I sell 10% of my shares to a person - that money goes into my pocket not the business... so how does that money go into the business? Do I personally "loan" the money to the company so it debits Assets and credits Owed to shareholders?
David, I think we've discussed it in person already, so I will answer for others to see. You have 2 options - 1. corporation issues new shares to the partner. In this case, the funds are injected directly into the corporation and could be used by it for any purpose.
2. You sell a portion of your own shares, in which case you have to be careful since first of all, you will generate a personal income subject to a tax. Then you can advance the funds to the corporation as a SH loan. In this situation, you might be able to draw the funds back from the corporation tax free in the future as a loan repayment.
great video
How do I get in contact with your company? I don’t see any links or info about your company on this TH-cam video?
Salary or Dividends -COULD YOU MAKE VIDEO (ADVANTAGE AND DISADVANTAGE) PLEASE
Ganesh. I am actually preparing something similar - Financial relations between shareholders and a corporation. It is less directed to what is better, and more towards which options exist.
Advantages could be different depending on your personal situation, alternative sources of income and more - this is something for an accountant to suggest.
I like your videos , very helpful information. I have some questions to ask ,1. i want to start online and whole sell business with my sister as a share holder so how do i register the company? Is it the business name as private federal corporation? I'm confused how to register the business based on shares, i hope to get the answer
thank you
Dear Naima, these are important questions, which I think would be better to discuss over the phone. please email me at info@cbes.ca and I will schedule a short phonecall for us to discuss.
In general, the logic of incorporation is reverse - you first incorporate, and then structure the shares and distribute them among your partners, family members etc.
Also - federal incorporation, is not just "name", it includes drafting shares provisions, appointment of directors and officers of the corporation, and more.
Hi Eugene, Thank you very much for this video I have one question please can a corporation (One Person Company sole owner sole shareholder) issue dividends (pay myself dividends) the articles of incorporation have this wording in box #3 "The corporation is authorized to issue an unlimited number of common shares".
if YES thank you
if No can I amend it ?
Thanks again Please please comment
@Business in Canada- Do it Right! Thanks for this informative video.
Currently, me and my friend are developing an internet-based product. Occasionally we might need 3rd party investor to scale our online business.
I have one question which I cannot find it anywhere
While incorporating online for federal. Once I insert my text(defining COMMON SHARE TERMS, and PREFERRED SHARE TERMS) to the classes of share.
I am confused as there is no section where I map the amount of share to a person or even define shareholder or is it a separate process that will begin after receiving a certificate of incorportaion?.
Sarabjeet, this is the main difference between making it yourself or using a specialist - we know how to define better and more diverse classes of shares.
With regards to the articles - you only provide provisions for different classes of shares, the remaining part of issuance, distribution etc. is done by the corporation through its board of directors. What you have to keep in mind is that a corporation can only issue those classes that were defined in the articles.
Where can I buy share certificates to fill in the business name myself? I need to do several. The ones they sell at Dye & Durham are blank.
Mary, I purchase mine from ES Services Corp., but you can buy from other providers as well. Essentially, you can even use a simple PDF file to create the certificate since there is no standard form of the certificate under the law...
How can I add a shareholder into my company’s register document. ? Thanks
Dear Sir, The video is very knowledgeable
Can you please brief does any non-Candian ( Pakistani ) become a director on common shares basis with a Candian director.
will be very thankful for your guidance
Thanks
Hi, it is a good question. Overall, a non-resident can be a shareholder and a director of the Canadian corporation along with one additional director who is a PR or citizen. You do not have to allocate shares/equity to that director, so that 100% of the shares are owned by the foreign resident.
This was helpful, thank you.
Hi Eugene, thank you for very informative video. I want to set up my own federal corporation. it is basically a one man corporation. can I be the sole share holder (100% common shares), sole director and sole officer?
Mina, overall - YES. A canadian corporation could have one person as its sole shareholder, director and officer at the same time. No limitations (subject to you being a local resident).
How many shares would you recommend to issue for a small corporation i we issued 1000 shares because we felt it would be easier to manage and less overwhelming are there any disadvantages to this?
1,000 is what I usually suggest. It allows to split up to 0.1% of the corporation without splitting the shares. In a small private corporation i do not see why you need more.
another question is the classes of shares, these i usually suggest to have at least 3...
hi ..is it compulsory to mention names of all the members of the board in the article of incorporation?? and if there is a single director in the company then can he sell his shares to someone else and does he need any permission from any other to sell his shares???
Hi NC. There is a bit of a confusion in your question, I'll try to clarify the issues:
1. All those acting as directors of a company are listed in the public registry - this information is publicly available.
2. Shareholders on the other hand is a confidential information, which is being provided to the CRA for tax purposes only.
3. Not all the directors must be shareholders. These are two separate positions.
4. Every shareholder can sell their shares to any third party and by law no permission is required. Usually, in small corporations this power is limited through a shareholders agreement.
I hope this clarifies the situation.
Could you do a video about how to had down my (was active now passive) Corp to my daughter.
Thanks, a great idea. Will do.
Where can I see all shareholders of canadian listed companies?
:-) Nowhere! This information is confidential and is not being posted on a public databases. You can only see the directors and officers of a corporation.
If the owner of a corporation agrees to provide you with their T2 - you can see Schedule 50 to find that information.
@@businessincanada-doitright1822 But why I can see the shareholders also of canadian companies on Nasdaq.com? Where do they get their permission?
@@JohnJohnson-qu2os this is different those are public corporations they are on a stock exchange but a private corporation is not public
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