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  Deciding on the division of shares...
When setting up a limited company you must decide how many shares you would like to offer each shareholder and at what price. The division of shares determines how much control each shareholder has over the company and the percentage of profit each shareholder will receive.
For example John wishes to set up a company with Paul, however Paul is unable to work full time for the company due to his other commitments. John therefore decides to create 100 shares at £1 each and offer 20 shares to Paul while keeping the rest for himself. This gives John a controlling interest in the company as he owns 80% of the votes, John will also receive 80% of the profits.
There are several factors that you must decide upon when dealing with shares.
Authorised share capital. This is the total number of shares you would like to create
(it can be as few as 1).
Issued share capital. This is the number of shares you would like to make available to the shareholders. You may have a share capital of £1000 made up of 1000 £1 shares, but only decide to make 500 available; the issued share capital is therefore £500.
Controlling Interest. A shareholder with over 50% of the share capital is said to have controlling interest over the company as he/she has more than half the votes.
Share certificates. When ever a share is issued to a shareholder you must acknowledge this by providing a share certificate to the shareholder once the value of the share is payed into the company account. Click here for an example of what you need to include on a share certificate.
View Share Certificate
   
It is important to realise the percentage of the company you own is determined by your percentage of the issued share capital not the authorised share capital. Imagine you create an authorised share capital of £1000 pounds but decide to make only £100 of this available during registration. The ownership of the company is determined by what percentage each shareholder owns of the £100 issued share capital.
 
Issuing more shares in the future
The process of bringing more shareholders into the company is governed by the Articles of Association that you will create later on. This is stipulated before the company is incorporated and may be changed by gaining a grant of authority from the shareholders through the appropriate resolution.
 
Memorandum of Association
 
   
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