Incorporating Your Business? | How to Create the Best Share Structure For Your Business

Today we're breaking down share structures! From how to create share structures in your newly incorporated business, to what went wrong with a share structure and how to fix it. Joe also breaks down the most common share structures that we see, both good and bad, and our recommendations of the best share structures.
Ready to incorporate? Use our affiliate link to Ownr and save some $: get.ownr.co/avalon/
Blog: Understanding Your Shareholder Loan
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Suggested Video: Understanding Your Shareholder Loan
• Understanding Your Sha...
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🧑‍🏫 ONLINE COURSES
► Take your business to the next level with our online courses.
www.avalonaccounting.ca/courses
🖥️ LEARN MODERN BOOKKEEPING
► Learn to do your own bookkeeping with modern tools and our proven practices.
www.avalonaccounting.ca/cours...
📈 BOOKKEEPING AND TAX FOR FREELANCERS
► This course teaches sole proprietors how to simplify bookkeeping and taxes.
www.avalonaccounting.ca/cours...
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FAQs
What Can I Write-off? bit.ly/EXPENSESCAN
Should I incorporate my business in Canada? bit.ly/INCORPCAN
What is a shareholder loan? bit.ly/SHLOANCAN
When and How Should I Hire an Employee? bit.ly/hirelikeapro
Should I offer profit sharing? bit.ly/PROFITSHARECAN
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1 Million Dollar Service Based Business Guide: joecollins.typeform.com/to/e2...
Manage Your Own Bookkeeping Course:
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[@AForEh]

I work for a bank in wealth management, and your videos help me sound smarter 🤣

[@nikkion2140]

You make an excellent teacher! Clear explanation and correct pace of delivery. Many thanks.

[@AvalonAccounting]

Thanks Nikki - made my day!

[@deanlaverick4488]

Fantastic video. Learned so much. I liked and subscribed!! My situation is more complicated but this has given me a start. I am from Calgary so very helpful.

[@YasirKhan-ob4qf]

This was a very insightful video. Thank you!

[@edweinersiu]

Joe your videos are chalk full of great information! I am learning so much from them. At the end of the video you recommended the use of OWNR to incorporate the business, which I did using the affiliate link you provided. A WORD OF CAUTION to others, OWNR did NOT honor the discount because they stated I had already visited their website prior to using the affiliate link. This is true, I had visited the Ownr website previously, but was not convinced I needed their services until I watched Joe and an Avalon Accounting video. In my opinion, Ownr does provide a nice interface but I would be cautious with their affiliate discount policies.

[@joshtimms364]

Thank you so much for this video!

[@AndrewEydt]

Great material! Thanks!!

[@Eamonnhickson]

Excellent video. Thank you.

[@mattholden9768]

Thanks Joe! The 50/50 owner split approach of splitting dividend eligible shares into two classes answered my question exactly.

[@AvalonAccounting]

Fantastic!

[@waizazawad]

Thank you so much man! Extra-ordinary content!

[@AvalonAccounting]

Thanks Waiza! Glad you enjoy it :)

[@cadietze1]

This was super helpful! Thank-you!

[@AvalonAccounting]

Thanks Courtney! Glad you found it helpful :)

[@chadrodriguezbelanger]

gold mine of information, thank you !

[@AvalonAccounting]

Thanks Chad - glad you've found it helpful!

[@mbehzadian]

This is so helpful; thank you!

[@AvalonAccounting]

Glad to hear it Masoud!

[@PawanYadav-mz7fv]

great advice

[@AndrewEydt]

Great info Joe - along with rest of videos. The spousal ownership, dividend participation, and active operation or investment was clearly explained and especially relevant for an OpCo. Curious on experiences with HoldCo and spousal ownership.

[@AvalonAccounting]

Definitely worth another video to dive into that topic! I've added it to our list of suggested content. Thanks for watching and really appreciate your feedback, Andrew!

[@chrisbird1813]

I'm happy to have found this and will be following along as I am planning on incorporating in the coming six months. I figured I should start planning now so I am not overwhelmed when it comes time to pull the pin. Thank you for the easy to understand info and keep up the great work!

[@danielmarcoux8895]

Great information. I recently incorporated two companies and wished I had watched this video first.

[@markusthurman877]

Hi, when creating your c corp, how did you find board of directors? I’m trying to set up my c corp but I’m stuck trying to find board members.

[@markusthurman877]

@danielmarcoux8895

[@edulivingincanada4706]

Thank you, great explanation.. pl, what is the difference between Outstanding shares and issue shares?

[@colleensword240]

This was very interesting and complete information. Thank you. If we set up as a single owner first, & then down the road want to add adult children with class A, B & C shares as described in your third example of share structure? I am incorporating shortly & would like to set it up for the future at this time. Thank you.

[@piusMusonda-iv8sj]

Very educatev

[@salsh4937]

pure gold

[@LightModeHelmets]

15:51, in the scenario when ownership is split 51/49 and the corp has class B and C shares as you described, couldn't the 51% owner opt to give themselves a dividend and never give one to the 49% owner? So from the 49% owner's perspective, it's safer to have only class A voting, participating shares so whenever a dividend is paid to the 51% owner, the 49% owner also gets a dividend.

[@AvalonAccounting]

We would highly recommend a shareholder agreement in this scenario to ensure dividends are equal over time but not necessarily in the same year. This helps the shareholders tax plan!

[@LightModeHelmets]

@@AvalonAccounting True, great point. I suppose a single share structure split 51/49 where both owners are holding companies also works in terms dividend timing. That way, each owner of their respective holding companies can choose when to distribute their dividend to themselves. I believe you mentioned this in one of your other videos.

[@joeuitvlugt1817]

what is the typical personal tax % at the end of the year for dividens to set aside?

[@ryangjewell]

I really wish this came out a few weeks ago! What are the differences when it comes to accounting for shares with a par value ($1 in my case) vs without a par value? Corporation has just one owner.

[@AvalonAccounting]

Other great question, thank Ryan - par value is the lowest amount it can be sold for. If no par value is stated then it can be sold for anything (a penny) - kudos to Melissa on our team who answered this for me :)

[@ryangjewell]

@@AvalonAccounting Any difference as far as recording the entry/ which account to use?

[@JaredSanders234]

Thanks for the video, it's super helpful. I have a question. When do you allocate and define the special rights/restrictions for each share class? I am currently incorporating a business, and in the application to incorporate, it asked for the authorized share structure and here is where you identify the name of class, the amount of authorized shares, par value, and either a 'yes' or 'no' if they have special rights and restrictions. Would those rights and restrictions be further defined in the Articles?

[@AvalonAccounting]

Hey Jared - I don't have a good answer for you on that one. I'd suggest reaching out to a lawyer to get some help. If you don't have a lawyer, you could try online lawyer consultation services like www.qase.ca or www.goodlawyer.ca. Sorry I couldn't be more help! - Paul

[@tylerdoell8436]

Hey Joe, do you have any good wisdom in regards to valuing your pre-revenue startup company?

[@torontotharun]

Can you please make a video for startup company selling stakes like 1% or 5%. then how does the share holding work?

[@karantalwar8165]

You cleared most of my doubts for share structure. I work for Corporate Registries in Alberta , Usually sometimes i get conufsed in share structures Thanks a Lot you are a wonderful teacher.

[@irenecho414]

Hi Joe, thank you for the video. Is there any benefit to this three share class structure compared to setting just two voting common share class instead (both with dividends rights)? 500 Class A voting common to person 1 & 500 class B voting common to person 2, then the dividens can be paid out per shareholder/class and voting right would be 50/50.

[@narendras9117]

Where can I update the ownership percentage of my company?

[@shalealbao]

Is it best to start with nominal shares like $0.01 per share at 1,000 shares or to start with a bigger number if the actual initial investment is let’s say $20,000?

[@HardwoodFloorRefinishing101]

Great video I subscribed to your channel. Question: I incorporated my business 12 January 2022 will I need to submit my 2021 tax return under the corporation or does my corporate tax return start in 2022? Thank you.

[@AvalonAccounting]

Great question! You first will need to decide your year-end date. You can choose any month-end date from January 31, 2022 to December 31, 2022. If you choose January 31, 2022, your first "year" would be 12 Jan 2022 -> 31 Jan 2022 and your corporate tax return would be due 6 months after year-end (July 31, 2022). No need to file a return for any period prior to the Corporation existing (i.e. no 2021 return required).

[@HardwoodFloorRefinishing101]

@@AvalonAccounting Thank you sir!

[@Rayenergy7]

Does this work for LLC Also? I'm starting my business/Company and looking for the best share structure for my Articles of Incorporation

[@AvalonAccounting]

This relates to Canadian businesses only and there aren't LLCs in Canada.

[@patmmope5876]

Hi Joe, I own 1000 Common voting Shares of my company authorised and issued par value shares. To accommodate new shareholders, I have been advised to 1. Redesignate the shares to Class A No Par Value shares but will still retain all their original rights & responsibilities. 2. Issue 10,000 Class B new Common voting shares to 4 new shareholders that rank pari pasu as Class A. 3. Issue 10,000 Class C new Common Non-voting shares to an Employee Share Trust. 4 Issue 10,000 Class D Preferred Shares. Can you please advise me on whether by restructuring my company share structure as above, I will still at all times retain control of the control of my company, whether on my own or together with the Class B Common shares.

[@IRV2490]

Wow mind blowing information "let me start at the start" and my favorite, "a share is a share" 🤯

[@piriyakantong9508]

Hi, great video as always. Just to clarify about the best share structure for a business with 3 owners, there should be 1 share class that is "voting + non-participating" 2 share classes, 1 for each owner, that are "non-voting + participating" Would that be correct? Also, when talking about equity of a business, does equity only refer to the share-class that has voting rights? Thank you in advance!

[@ayeshapoojitha1826]

Can i helpe

[@2abalsys]

i hate his hair short...

[@paulsharpe85]

Don't worry, I let him know! He's promised to leave it long at least through 2023 😆

[@JoeCollinsBC]

@@paulsharpe85 I said nothing of the sort! I am shaving my head for this hair disloyalty.