Of all the decisions made at incorporation, the share structure is the most consequential and the most commonly under-thought. The share structure determines who owns the corporation, who receives dividends, how voting control works, and whether you can split income with family members or bring in investors later. Changing the share structure after incorporation is possible but expensive and complex — getting it right at the start costs nothing extra.
The Basic Structure: One Class of Common Shares
The simplest possible share structure is one class of common shares with identical voting rights, dividend rights, and participation on wind-up. This is what most online incorporation services create by default.
- Easy to understand and administer
- Every shareholder has identical rights
- Perfectly adequate for a solo business owner with no plans to expand ownership
- Cannot easily be used for income splitting with family members
When one class works: If you are a solo owner, have no spouse or adult children you want to involve, and do not plan to bring in investors or sell shares in the near future, a single class is fine. Add complexity only when you need it.
Multiple Share Classes: Enabling Income Splitting
The most common reason Ontario incorporated owners want multiple share classes is income splitting — the ability to pay dividends to a spouse or adult children who are in lower tax brackets, reducing the family's overall tax burden.
To enable this, your articles of incorporation should authorize multiple classes of shares — typically common shares (voting, participating) and one or more classes of non-voting or discretionary dividend shares.
- Class A (voting, participating): held by the business owner
- Class B (non-voting, dividend discretion): can be issued to spouse or adult children
- Directors can choose to declare dividends on one class and not others
- Allows paying higher dividends to lower-income family members each year
TOSI rules warning: The Tax on Split Income (TOSI) rules enacted in 2018 significantly limit income splitting with family members under 25, or those not meaningfully engaged in the business. Before planning any income splitting strategy, confirm with a CPA that the dividends will not be subject to TOSI at the highest marginal rate.
Preferred Shares: For Investments and Estate Freezes
Preferred shares have a fixed redemption value and priority on dividends — they do not participate in future growth of the corporation. They are used primarily for estate freezes and investment structuring.
- Estate freeze: owner exchanges growth shares for preferred shares at current value, letting future growth accrue to new shareholders
- Fixed dividend: can be structured to pay a fixed annual dividend rate
- Priority on wind-up: paid out before common shareholders if corporation is wound up
- Often used in family trust structures and holding company reorganizations
Founder Shares: Planning for Future Investors
If you anticipate bringing in outside investors — whether angel investors, venture capital, or business partners — your initial share structure should be designed with this in mind from the start.
- Issue shares to founders at a very low price per share at inception (before any value is created)
- Later investors pay a higher price, reflecting the value you have built
- A large authorized share count (e.g., unlimited or 10,000,000 shares) gives flexibility
- Anti-dilution provisions can be added to protect early investors
Subscription price matters: Founders should subscribe for their shares at a nominal price (e.g., $0.001 or $1 per share). If the company grows significantly, later shares sold to investors at $1,000 per share creates a stark value difference — exactly the intent.
How to Change Your Share Structure Later
If your business grows and your initial share structure no longer fits, you can amend your articles of incorporation to add or modify share classes. This is a formal corporate process requiring shareholder approval and articles of amendment filed with the province.
- Requires shareholder resolution approving the amendment
- New articles of amendment filed with Ontario Business Registry ($150 fee)
- Share reorganizations may trigger tax consequences — CRA section 86 or 51 rollover rules
- New shares must be issued under the amended articles
- Professional advice from a lawyer and CPA is required
Cost of fixing a simple structure: Reorganizing a single-class corporation to add income-splitting share classes after the fact typically costs $3,000–$8,000 in legal and accounting fees. Getting a proper structure from day one costs nothing extra.
Key Takeaways
Your share structure is the DNA of your corporation — it shapes every major decision about dividends, ownership, and value for the life of the business. Spend an extra hour with your CPA or lawyer designing a structure that anticipates your likely needs over the next 10 years. The cost is zero; the benefit can be significant.
Get Your Share Structure Right from Day One
We design corporation share structures for Ontario business owners that support income splitting, future investors, and business sales. Book a consultation before you incorporate.
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