A unit of ownership in a corporation, representing a claim on the company’s assets and earnings—commonly issued to founders, investors, or employees.
What is a Share?
A share (also called stock in the U.S.) is a unit of ownership in a corporation. When a company issues shares, it is dividing its ownership into portions that can be allocated to individuals or entities. Holding shares gives the owner—called a shareholder—certain rights, which may include voting on corporate matters, receiving dividends, and sharing in the company’s success or liquidation proceeds.
Shares are most commonly issued by C Corporations and S Corporations, as LLCs do not issue shares (LLCs instead allocate membership interests or units). In a corporation, the total number of shares authorized is stated in the Certificate of Incorporation and then issued through stock certificates or equity agreements.
There are two primary types of shares:
- Common Stock: Standard ownership, often held by founders and employees. Comes with basic voting rights and the potential to receive dividends.
- Preferred Stock: Typically issued to investors, this class of shares includes priority rights, such as liquidation preferences, anti-dilution protection, and sometimes dividends before common stockholders.
The number of shares owned determines the percentage of ownership in the company. For example, if a company issues 1,000,000 shares and a founder holds 400,000, they own 40% of the company (assuming no other classes of stock affect this calculation).
For non-U.S. founders, understanding how shares work is key to raising capital, managing ownership, and structuring equity for co-founders or employees. U.S. investors will often expect clear equity breakdowns through Cap Tables and may request preferred shares with specific terms. Founders may also create option pools—reserved shares for future employees or advisors, subject to vesting schedules.
Shares can be transferred, issued, or repurchased, and they come with both legal and tax implications. For example, issuing shares may require securities law compliance, and owning shares can trigger reporting obligations for foreign shareholders.
In summary, a share is more than just a unit of ownership—it represents legal rights, financial potential, and often a founder’s or investor’s stake in the success of the business. Properly structuring and tracking shares is essential for governance, fundraising, and growth.
