When starting a Limited company, one of the earliest decisions you need to make is how you’ll structure your shares. Though shares are more commonly associated with public companies and investments, private businesses use shares as a way to dictate ownership. Curious about the difference? Check out our guide "Public Limited companies vs Private Limited companies."

When incorporating your company for the first time, you’ll need to choose how many shares you want to issue and how they’ll be allocated. 

This choice can feel a bit intimidating if you don’t understand how shares work. Don’t worry – we’re here to help. In this short guide, we’ll walk you through everything you need to know, from the role shares play in limited companies through to what ‘issuing’ and ‘allocation’ actually mean. 

If you’re considering setting up a Limited company, keep reading to find out exactly how many shares you’ll need to issue and how they’ll affect your company structure…

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Understanding the basics of company shares

To register a Limited company, you must issue at least one share. A share acts as a piece or portion of ownership in your company. If you only issue a single share, the owner of that share has 100% control over the business. If you issue more than one, ownership can be split between shareholders based on share allocation. 

To be a ‘majority’ shareholder, a member needs to own 50% of the total shares issued. Majority shareholders have more control over decisions and voting within the organisation. Those who own less than 50% of shares are minority shareholders and have less sway. 

Companies must have at least one majority shareholder upon incorporation. There is, however, no upper limit to the number of shareholders a business can have – it all depends on how many shares are allocated. Shareholders are often called ‘members’. 

If you want multiple owners in a company, you need to issue more than one share so you can split ownership accordingly. How you split shares will depend on how many potential owners you have and what level of control you want them to have. 

For example, a two-person company could issue two shares total and then allocate one share (50%) to each shareholder to make both a majority shareholder. Alternatively, you could issue 100 shares and split them 60/40 to give one person more control. 

To summarise, you’ll need to create a set amount of shares when starting your business. The more you issue, the more complex your ownership structure becomes. We’d advise that small businesses only issue shares in whole amounts such as 10, 100, or 1000 because it makes allocation and ownership percentages far easier to work out. 

Setting share value

Shares don’t just dictate ownership – they also have two types of value known as ‘nominal’ and ‘market’ value. 

• Nominal value: when registering your limited company, you’ll need to set a nominal value. This is the amount a shareholder agrees to pay to own a single share. Most small businesses set this as £1 each, but you can choose any amount you want. 
  
  • Be careful, however, as the total nominal value of an owner’s shares dictates how much they are liable for if the company falls into debt. Setting shares to just £1 means that, even with 100 shares issued, shareholders can only be held personally liable for a grand total of £100. 
• Market value: the ‘market’ value of a share is how much a share is worth when it is sold, either to other directors when an owner is leaving the company, or to another company or individual if the whole business is sold. 

The difference between nominal value and market value is referred to as share premium. 

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Share classes

Shares can have a ‘class’ which has certain conditions attached to it. There are quite a few different types of share class, but the main ones associated with private companies are:

• Ordinary shares: this is the most common type of share and will be the right option for most new businesses. An ordinary share carries one ‘vote’ per share and allows the owner to participate equally in all dividends. 
• Non-voting shares: these shares carry no right to vote or attend ownership meetings, which usually means shareholders have less control over the business but can still benefit from dividends. 
• Preference shares: this gives a shareholder ‘preference’ over other share classes to receive dividend payments from the company’s profits. The amount paid is usually based on the nominal value of the shares.  
• Redeemable shares: a unique non-voting share that is issued on specific terms that allow a company to buy them back at a later date. 

There are other classes, but they’re only worth discussing in specialist cases and don’t usually apply to the needs of most UK SMEs. 
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What is the minimum number of shares you should issue?

Having at least one share is the legal minimum for a private company in the UK. However, having a single share limits your ability to change ownership structures, bring in other directors or sell parts of your company. It may also make your company look smaller from an external perspective and limit your ability to attract finance from banks or other lenders. 

There’s no set limit on how many shares you need – but we’d advise sticking to even numbers such as 10 or 100 shares, which allows you to set a sensible nominal value of £1 each whilst making it easy to split ownership between multiple directors. 

There is no maximum limit on the number of shares issued, so you can have as many as you like. The more there are, the greater the nominal value (and subsequently, shareholder liability) will be. 

Allocating Shares for private vs. public companies

Private and public companies are both limited by shares, but the way shares function is very different… 

In a private company, shares are issued as we’ve described above and are usually only worth a small nominal amount to limit potential liability. The ‘market’ rate may increase, but the actual nominal value remains the same as when the business was first incorporated. Shares are usually divided between majority and minority shareholders as fairly as possible, with most UK businesses opting to issue 10-100 shares worth £1 each.

Public companies, on the other hand, must have at least £50,000 of issued share capital. This immediately limits the viability of setting up a PLC to businesses or individuals who can afford this higher figure. Shares are much more critical to a public company, as they can be sold to the general public via stock exchanges and used to raise capital in the business. 
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Common shareholder scenarios for limited businesses

Shares can be confusing, even once you know how they work. To help make your initial share decisions easier than ever, we’ll explore some common business scenarios and show you how you might want to structure shares for simple, efficient operations…

Solo founder

If you’re the sole owner of your business, you can issue and allocate a single share worth £1. It may, however, be worth issuing 10 or 100 total shares so that you can transfer them in the future if you decide to expand your team. 

Co-founders

If you’re starting your business with two owners, the fairest way to handle shares is to issue an even number of shares and split them in half so that you both become majority shareholders. Typically, this is achieved by issuing 100 shares valued at £1 each, giving each co-founder 50% stake and £50 of liability. 

Larger team

In a business where you want to have multiple shareholders, you’ll need to think carefully about the impact of majority and minority shareholders.

There are two common ways to handle this:

1. Give one person majority ownership and split the rest equally between minority members. For example, a three-person business could issue 100 shares and allocate 50 to one majority owner and then 25 to the remaining members. 
2. Split ownership equally, with no majority owners. A four-person business with 100 shares, for example, could have allocate 25 to each shareholder.

This is where the importance of a shareholders' agreement is hard to overstate. This document helps outline shareholder responsibilities and protections and is absolutely essential in large teams. 
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Setting your company up for success

Having covered the basic ideas behind shares for limited companies, you should now have a better idea of how many shares you need to issue and what value to set them at. 

If you’re still unsure, it’s generally a safe bet to start small and choose an amount that’s easily divisible, such as 10 or 100, and to set the nominal value at just £1 each. This isn’t always the right idea, however, as some businesses and ownership structures change how you’ll want to approach shares. 

If you’d rather have someone else take care of the formation process and set your company up for success in the future, Crunch can help. Get your business up and running within a matter of hours with our expert formations service. 
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Addressing common questions

What is a good number of shares for a startup?

Startups are no different from any other new company, though they typically aim to attract private investors at a much greater rate than other limited businesses. That means you’ll often need a higher total amount of shares (1000 to 10,000) so you can sell some to investors without losing control of your business. 

When are shares required to be paid for?

Shareholders should pay the company for the nominal value of their shares. Shares should be paid for immediately at specific moments such as:

• When the company is formed or wound up
• When new shares are issued
• When shares are transferred 
• At a date specified in the articles of association

“How many shares should I start my company with if I…”

The answer depends entirely on your individual circumstances and how you plan to run your company. The general rule for all limited companies is to keep shares to manageable, easily-divisible amounts and to limit nominal value.

Want more information? We'd recommend checking out our Limited company knowledge hub.