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  • Samuel Osei Law Corporation

Key Considerations for Share Structure in Incorporating a Company in British Columbia

Updated: Jan 3

When incorporating a company in British Columbia, choosing the appropriate share structure is a vital step that can significantly impact the organization's ownership, control, and future growth. The share structure refers to the division of a company's ownership into shares, which can come with certain rights for shareholders. Samuel Osei Law Corporation, a small business law firm in Vancouver, British Columbia, provides expert guidance on the key factors to consider when making share structure decisions for your incorporated business.

1. Business Objectives and Growth Plans:

Your company's long-term goals and growth plans play a crucial role in determining the share structure. Factors to consider include the potential need for raising capital, attracting investors, or facilitating future mergers or acquisitions. By understanding your business objectives, Samuel Osei Law Corporation can help you design a share structure that aligns with your growth plans.

2. Ownership and Control: The share structure allows founders to determine the ownership distribution and maintain control over the company. This is done by allocating different classes of shares, such as common shares and preferred shares, with varying voting rights and privileges. Founders may want to retain a majority of voting rights to make important decisions and maintain control of the company's direction.

3. Investment and Funding: The share structure plays a crucial role in attracting investors and raising capital. Companies can issue different classes of shares to accommodate various investment needs. For instance, preferred shares may be offered to investors who seek priority in receiving dividends or repayment in case of liquidation. Common shares, on the other hand, may provide investors with voting rights and a share in the company's profits.

4. Employee Stock Options: Offering stock options to employees can be an effective tool to attract and retain talented individuals. By allocating a separate class of shares for employee stock options, companies can provide employees with the opportunity to purchase shares at a predetermined price in the future. This incentivizes employees to contribute to the company's success and aligns their interests with those of the shareholders.

5. Tax Planning: The share structure can also be influenced by tax considerations. For example, Canadian tax laws provide certain advantages for small business corporations, allowing them to access the lifetime capital gains exemption. Structuring shares in a way that maximizes these tax benefits can be a crucial decision for entrepreneurs and shareholders.

6. Exit Strategy: When planning for the future, the share structure can impact potential exit strategies. If the founders envision selling the company or going public, they may need to structure the shares in a way that is attractive to potential buyers or investors. This may involve creating different share classes with varying rights and restrictions to accommodate the preferences of potential acquirers.

7. Regulatory Compliance: Companies must comply with the laws and regulations of the jurisdiction they operate in. In British Columbia, there are specific requirements and restrictions on share structures that must be followed. For example, there may be limitations on the types of shares, the number of shareholders, or the rights and privileges attached to certain classes of shares. Adhering to these regulations ensures the company's compliance and avoids potential legal issues.

It is important to note that determining the optimal share structure involves careful consideration of these factors while seeking advice from legal and financial professionals. They can provide specific guidance based on the unique circumstances and objectives of the company and ensure compliance with applicable laws and regulations. By seeking guidance from Samuel Osei Law Corporation, a trusted small business law firm in Vancouver, British Columbia, you can make informed decisions regarding share classes, ownership, control, financing, and tax implications. Our experience in company law will ensure that your share structure aligns with your business objectives while providing a solid foundation for future growth and success. Contact Samuel Osei Law Corporation today to receive experienced legal advice tailored to your specific needs.

Phone: 778-680-6087


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