The number of shares to issue is a very contentious issue for small to medium sized companies with less than 5 shareholders. Let’s take a look at the advantages of issuing shares at the different ends of the spectrum in the following example:

Issuing few shares 

This approach is best taken when there is little probability for the business to raise new funds, transfer or issue of new shares.

Some advantages include:

• Simpler to understand
• Easier to manage

Issuing many shares

In contrast to the initial approach, this method is best if the Company is likely to make adjustments or expand their share capital.

Some advantages include:

• Flexibility – With a larger number of shares a Company is more easily able to adjust or change ownerships as they like. Some examples include:
• Allotting new shares
• Changing specific ownership percentages
• Trading shares
• Appearance of bigger size. A Company with a larger number of shares can often appear to be more substantial on paper.

As always, this advice is general in nature and you must take into account your personal and business’ circumstances when making this decision.

August 23, 2016 09:06