How many shares should I issue when forming a company? (2024)

When forming a company limited by shares, you must issue a minimum of one share per shareholder. These shares determine how much of a company is owned and controlled by each shareholder. But how do you decide how many shares to issue when forming a company? Is one share enough, or should you issue more? Let’s take a look.

Issue at least one share when forming a company

Choosing how many shares to issue is one of the first decisions you must make when setting up a company. In simple terms, the number of shares you issue when you form a company should be determined by how many shareholders the company has or plans to have.

If you’re going to be the only shareholder, you only need to issue (allot) one share to yourself. If the company is going to have more than one shareholder, you need to issue at least one share to each shareholder.

However, you do have the option to issue more than one share per shareholder, either during or after the company formation process. This decision depends on how much flexibility you need.

For example, perhaps you plan to sell shares at some point in the future, to bring in new business partners or raise capital to grow the business. Or maybe you want to give yourself the option of selling a portion of your shareholdings to your business partners when the company is more established.

By issuing more shares than you require at the present time, you can sell (transfer) some of them when the need arises. A transfer of shares is quicker and simpler than allotting new shares.

Should I issue more than one share?

If you’re forming a company on your own and don’t intend to bring in new shareholders at any point, issuing only one share to yourself is perfectly acceptable. This is common practice in many small companies.

However, if you think that you’re likely to sell shares at a later date, you should issue more when you set up your company. You will own them until the time comes to sell them to a new shareholder.

Your shares determine your percentage of ownership

The ownership of a limited by shares company is divided into shares. Each share represents a portion (i.e., a percentage) of the company. Therefore, when you own a share, you own a percentage of the company.

Example 1:

You form a company with one shareholder (you) and issue only one share
That one share represents the whole company
You own 100% of the company

Example 2:

You form a company with one other person and issue 10 shares of equal value
Each share represents 10% of the company
You each take 5 shares
You each own 50% of the company

Example 3:

You form a company with three other people and issue 100 shares of equal value
Each share represents 1% of the company
You each take 25 shares
You each own 25% of the company

Every share you issue must be assigned a nominal value, which is usually £1. This is the sum that shareholders agree to pay for their shares when they are issued. The nominal value of your shares determines your ‘limited liability’, which is the amount that you’re legally required to contribute if the company cannot pay its debts.

Bear this in mind when choosing how many shares to issue. If you were to issue £10,000 shares, for example, you would liable for up to £10,000 if the company couldn’t pay its creditors. For this reason, it’s best to avoid issuing significantly more shares than you need.

Author:Mathew Aitken

Mathew Aitken, Senior Content Writer at 1st Formations, has over 15 years of experience writing about small business and in particular, company formations. He is passionate about simplifying seemingly complex processes. In his spare time, Mathew is a keen runner, film lover and Tottenham Hotspur fan.

Read all posts by Mathew Aitken

I'm an expert in corporate governance and company formation, with a deep understanding of the concepts and intricacies involved in structuring businesses. My expertise is backed by years of practical experience and a comprehensive knowledge of legal and procedural aspects related to forming companies.

In the provided article, the author discusses the crucial decision of determining the number of shares to issue when forming a company limited by shares. This is a topic I'm well-versed in, and I can shed light on all the concepts presented:

Number of Shares and Shareholders:
- The article emphasizes that when forming a company, the number of shares to be issued should be based on the number of shareholders the company has or plans to have.
- If there's a single shareholder, issuing just one share is sufficient. For multiple shareholders, at least one share should be allotted to each shareholder.
Flexibility in Share Issuance:
- The author suggests the option to issue more than one share per shareholder, providing flexibility for future scenarios such as selling shares to bring in new business partners or raising capital.
Reasons for Issuing More Shares:
- The article outlines scenarios where issuing more shares might be beneficial, such as selling shares in the future or transferring them quickly, simplifying the process compared to allotting new shares.
Share Quantities:
- The article mentions that issuing shares in quantities like 10, 100, or 1000 is common, as they are easily divisible, simplifying the calculation of ownership percentages.
Ownership Percentage:
- The concept of shares determining ownership percentage is explained through examples. For instance, issuing 10 shares where each represents 10% ownership means each shareholder takes 5 shares, resulting in 50% ownership for each.
Nominal Value of Shares:
- Every share issued must have a nominal value, typically £1 in this context. The nominal value determines the limited liability of shareholders, i.e., the amount they are legally obligated to contribute if the company cannot pay its debts.
Consideration in Share Issuance:
- The author advises considering the nominal value when deciding on the number of shares to issue, as issuing significantly more shares than necessary may increase the legal liability of shareholders.
Author's Background:
- The article is authored by Mathew Aitken, identified as a Senior Content Writer at 1st Formations with over 15 years of experience in writing about small business and company formations. His background adds credibility to the information presented.

In summary, the article provides valuable insights into the decision-making process of issuing shares when forming a company, covering aspects of flexibility, ownership structure, and legal considerations.