• Last Updated:
  • Apr 18th, 2017 7:20 pm
[OP]
Newbie
Feb 9, 2016
24 posts

Share structure question

I'm planning to start a new business with 2 investors. I will do most of work and we want the ownership to be 50% (me) and 25% each for the investors.

I would go ahead with the following structure:
- Class A (to vote) - 100 shares to myself
- Class B (to receive dividends) - 50 to myself, 20 each to the investors

Does this make sense? How would you set up the structure?
5 replies
Newbie
Jan 18, 2017
34 posts
15 upvotes
VOTING SHARES:
-Class A voting shares - 100 issued to you;
-Class A voting shares - 50 to Partner A;
-Class A voting shares - 50 to Partner B;

NON-VOTING SHARES:
-Class B non-voting preferred shares - 100 issued to you;
-Class C non-voting preferred shares - 100 issued to Partner A;
-Class D non-voting preferred shares - 100 issued to Partner B;

This setup gives the 50/25/25 ownership structure, and also allows for differential dividends to be paid.

You're going to need one hell of of a shareholder agreement though. There's lots of potential for shareholder conflict in the way you want to set it up.

This allows for differential
______
Canadian & US tax guy
Newbie
Jul 24, 2013
17 posts
4 upvotes
Winnipeg
If investors are cool with no voting rights, the simplest approach is 50 Class A for you and 25+25 Class B shares for them. Class A folks get to decide when and how to issue future Class B, so you don't need to keep some for yourself in the first round. Your investors may be seeing them as partners though, so situation may not be as straightforward as you think.
[OP]
Newbie
Feb 9, 2016
24 posts
crossborderguy wrote:
Apr 18th, 2017 2:25 pm
VOTING SHARES:
-Class A voting shares - 100 issued to you;
-Class A voting shares - 50 to Partner A;
-Class A voting shares - 50 to Partner B;

NON-VOTING SHARES:
-Class B non-voting preferred shares - 100 issued to you;
-Class C non-voting preferred shares - 100 issued to Partner A;
-Class D non-voting preferred shares - 100 issued to Partner B;

This setup gives the 50/25/25 ownership structure, and also allows for differential dividends to be paid.

You're going to need one hell of of a shareholder agreement though. There's lots of potential for shareholder conflict in the way you want to set it up.

This allows for differential
Thank you for your advice. For non-voting shares, does it have to be preferred? Common shares mean ownership regardless of the rights attached?
Newbie
Jan 18, 2017
34 posts
15 upvotes
All the rights and consideration associated with each share class will be specified in your incorporation schedules. My example is just a quick off-the-cuff suggestion. Some share structures don't even make a distinction between "Common" vs "Preferred". Instead you just have "Class X voting" and "Class Y non-voting."

For something like this, where you have multiple parties involved that have a say in the company equity, I'd recommend using a lawyer or accountant to set things up.
fbjin01 wrote:
Apr 18th, 2017 2:42 pm
Thank you for your advice. For non-voting shares, does it have to be preferred? Common shares mean ownership regardless of the rights attached?
______
Canadian & US tax guy
[OP]
Newbie
Feb 9, 2016
24 posts
crossborderguy wrote:
Apr 18th, 2017 3:46 pm
All the rights and consideration associated with each share class will be specified in your incorporation schedules. My example is just a quick off-the-cuff suggestion. Some share structures don't even make a distinction between "Common" vs "Preferred". Instead you just have "Class X voting" and "Class Y non-voting."

For something like this, where you have multiple parties involved that have a say in the company equity, I'd recommend using a lawyer or accountant to set things up.
Thank you. I appreciate it

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