Know your company’s shares

 

 

Why you need shares? How many shares you need? When to issue the shares? What are the differences between Common Shares and Preferred Shares? Where to get the shareholder certificate and other qualifications?

 

Who need shares?
In accordance with the Delaware Law, any common corporations need have Common Shares. Limited Liability Companies have no requirement of shares. Non-Stock Corporation can not have any shares. S-corporations can not have Preferred Shares.

 

Why do I need shares?
You need use the shares to prove your share ownership in the company. For Limited Liability Companies, you do not need share certificate.

 

What are common shares and preferred shares?
Common Shares are defined by law: each share stands for voting right. The owner of the Common Shares has the right of dividends in accordance with the shares (if the dividends have been declared).

In order to keep the controlling right of shares when raising funds, for the internal staffs, Preferred Share is another choice. In the Delaware Law, there is no fixed formula or regulation of Preferred Share. And it is mainly made and limited by the traders. This is one of the advantages of Company Law of Delaware: flexibility. Company lawyers call the share as: “Preferred Rubber Check”.

When you purchase Preferred Share certificate through us, you will receive 10 additional share certificates marked as “Preferred Shares”, a user guide of Preferred Share and the registration certificate and records of the company with the authorization of the sale and issue of these shares. If you purchase the Preferred Shares when you registered, we charge $150. If you purchase it later, we charge $350.

 

When can I issue the stock?
It depends on you. Apparently, in the duration of the company, you issue the Common Shares to yourself to prove your right of ownership. Other initial investors will do the same. Go on like this, according to the situation, when you need more investors, you will issue more Common Shares. But then you may consider issuing Preferred Shares to you and your investors, in order to keep your rights and special qualifications.

 

Where can I get the share certificate and other materials of the company?
Though our standard and fast service package, you will receive a full set of company materials, including 20 share certificates. If you need more, please call us and email us.

 

How many shares do I need?
Your annual franchise tax is based on your number of shares and the value of each share, so it is better to have the lower number of the two.

At the initial stage, the lawyer may recommend you to start with 100 shares with no par value. It forms the lowest price of annual franchise tax, $ 125 and the highest requirements of the number of shares that can be achieved. Later, you can increase the number of shares if you need more.

If you need more than 1500 shares at the initial stage, it is very expensive to issue shares with no par value. You will save considerable taxes with a small amount of shares of no par value in your stock.

With the shares of no par value, to meet the lowest requirement of the initial tax (including the services), the total book value can not exceed $ 75,000.

The relevant formula is as follows:

Total number of shares (multiplied by) par value= $ 75,000 (or less)

Accordingly, the following share configuration can meet the lowest tax requirements:

15,000 shares @ $5.00 each (par value) = $75,000 
150,000 shares @ $0.50 each (par value) = $75,000 
1,500,000 shares @ $0.05 each (par value) = $75,000 
15,000,000 shares @ $0.005 each (par value) = $75,000

The above formula includes various types of shares, Common Shares and Preferred Shares.

Except that you can not sell shares at the price which is lower than par value, par value has nothing to do with market value or share price. If you intend to issue shares for yourself to establish a company, you may lower the par value. This will not limit the share price when you sell the shares to other investors. Share price is the price that the market can afford, is also expected to be volatile.

 

If you intend to set the par value within $100, your franchise tax will be calculated based on a complicated formula and according to the net assets and the number of shares (non-rated share) at the end of the year of your company. We will help you calculate the annual franchise tax freely when you provide all the necessary information.