Share Classes Explained Simply

What is a share?

A share represents a unit of ownership in a corporation. When you incorporate, the corporation is authorized to issue shares — and whoever holds those shares owns a proportional piece of the company. If you incorporate alone and issue 100 common shares to yourself, you own 100% of the company. If you later bring in a co-founder and issue them 100 new shares, you each own 50%.

Shares come in different classes — think of them as different types of shares with different rights attached. Common shares are the default. Everything else (preferred shares, multiple voting shares, etc.) is built on top of that foundation.

Common shares — what most founders need

Common shares are the standard class of shares in most small Canadian corporations and U.S. LLCs. They typically carry:

• The right to vote at shareholder meetings (usually one vote per share)
• The right to receive dividends if declared by the directors
• The right to share in the remaining assets if the company is wound up

For most solo founders and small teams that aren't raising venture capital, a single class of common shares is all you need. Keep it simple.

Preferred shares — when investors enter the picture

Preferred shares are typically issued to investors rather than founders. They usually carry special rights that common shares don't have:

• Liquidation preference — preferred shareholders get paid back before common shareholders if the company is sold or wound down
• Dividend preference — preferred shareholders may receive dividends before common shareholders
• Conversion rights — preferred shares can often convert to common shares (important for IPOs)
• Anti-dilution protections — if the company raises at a lower valuation, preferred shareholders are protected

If you're planning to raise a priced round of venture capital, your articles will likely need a preferred share class — or you'll need to amend your articles at the time of investment. Your investors' lawyers will specify what rights they require.

Multiple voting shares — for founders who want to stay in control

Multiple voting shares (sometimes called "supervoting shares") give certain shareholders — usually founders — more votes per share than ordinary common shareholders. This is how founders at companies like Google and Meta maintained voting control even after taking large outside investment.

In Canada, you'd set this up at the time of incorporation by creating two classes of shares: a high-vote class for founders (e.g., 10 votes per share) and a regular class for investors. This is more complex to set up and maintain, and not something most early-stage founders need to worry about until they're deep into Series A conversations.

What should you actually set up?

Bottom line: Start with common shares. Keep it simple. You can always amend your articles later when the situation actually requires it. Complexity upfront without a reason for it is just cost and confusion.