Adding Shareholders to a Corporation
Q: How do I add two new shareholders to my corporation?
Thank you to a client from California for that great question! To add new shareholders to your corporation, you need to either issue new shares or sell existing shares in your company. If you choose to sell shares in your company to a new shareholder, the price must be agreed upon by both your corporation and the shareholder. We break the process down.
What is a shareholder?
A shareholder in a corporation is a person or institution who has invested money in exchange for part ownership in your company. Shareholders are essentially the owners who provide financial backing in return for earnings the business makes after paying taxes.
How do I add a shareholder to my corporation?
Adding a shareholder to your corporation can be done in two ways:
- selling a person shares in your company
- issuing new shares to a person by increasing your corporation’s share amount
Shares are issued when offering someone part-ownership in your corporation. You’ll need to have the number of shares sold approved by any other shareholders in your company. You may have outlined the exact process and shares offered for bringing on new shareholders in your corporation’s articles of incorporation, corporate bylaws, or shareholders’ agreement. The minimum number of shares you can offer or sell is one.
Selling shares in a corporation.
When adding a new shareholder by selling them shares in your company, you are offering the new shareholder an investment stake in your company. You’ll need to get approval from your board of directors and potentially other shareholders.
Learn more about selling stock shares.
Issuing new shares in a corporation.
Issuing new shares for your corporation to a new shareholder may cause you to have to increase the number of shares your corporation has. The maximum number of shares available to you will be outlined in your articles of incorporation. If there are no available shares to issue, you and the other shareholders can transfer shares to the new shareholder or increase your corporation’s share amount by holding a shareholder meeting.
Learn more about operating a corporation.
