Share capital

• Defined in the articles of incorporation (the official document that establishes the company), at the federal level or in Quebec
• Common stock: It grants voting rights, a share of profits (dividends), and the potential for the business’s value to appreciate
• Preferred Stock: Tailored Rights, Useful for Planning the Transfer of a Business
• A flexible share capital makes it easier to manage your taxes down the road
• If structured properly, it may qualify for a lifetime capital gains exemption upon sale, amounting to approximately $1.25 million per eligible shareholder in 2026

Imagine a pizza: share capital determines in advance how many slices it can be cut into and who is entitled to receive them. Many entrepreneurs choose a generic share capital structure when they start their business without giving it much thought, only to pay dearly years later to reorganize it. A well-thought-out structure from the start opens doors: distributing profits differently based on owner categories, bringing in a spouse or an investor, and preparing for succession. It can also provide access, upon sale, to Lifetime capital gains exemption : approximately $1.25 million in tax-free gains per eligible shareholder in 2026, on eligible small-business shares. It is also share capital that makes it possible to shareholder agreement clear and the addition of a management company (Gesco). Please note: The tax rules governing profits distributed to family members are strict. Bankeo will connect you, for free, with a vetted accountant who will align your share capital with your goals, and we’ll be there for you every step of the way.

What exactly is share capital?

It refers to all the shares that your business is authorized to issue and distribute to its owners in exchange for their money. It’s essentially the business’s ownership structure: it determines who owns what and what rights each share confers (voting, receiving a share of profits, benefiting from an increase in value).

What is the difference between common stock and preferred stock?

Common stock generally entitles the holder to vote, receive a share of profits (a dividend), and benefit from the business’s appreciation in value. Preferred shares offer individual rights, often including priority in profit distribution or a predetermined buyback price, which are useful when preparing for the transfer of the business or the arrival of an investor.

Can the share capital be changed after the company is incorporated?

Yes, by amending the articles of incorporation or reorganizing the company, but these processes require professionals and may result in tax liabilities. It’s almost always cheaper to set up a flexible share capital structure from the start than to have to redo everything later, once the shares have appreciated in value. Bankeo connects you for free with a vetted accountant who specializes in business formation, at no cost to you, and we’re here to support you every step of the way.