This course is educational and is not legal, tax or financial advice. Equity rules vary by jurisdiction; consult qualified professionals for your situation.
What Shares Represent
A company’s ownership is divided into shares. Your ownership percentage is the number of shares you hold divided by the total number of shares. If a company has 10,000,000 shares and you hold 4,000,000, you own 40 percent.
Authorised and Issued
Some jurisdictions distinguish between shares the company is allowed to issue and shares it has actually issued. Ownership is calculated on issued shares, or on a fully diluted basis.
Fully Diluted Ownership
Fully diluted ownership counts all issued shares plus all shares that could be issued from options, warrants and convertible instruments. Investors usually think in fully diluted terms because it shows ownership after all commitments are honoured.
Share Classes
Companies may have different classes, such as common or ordinary shares held by founders and employees, and preferred shares issued to investors with additional rights.
Exercise
List every person or entity that holds or has been promised shares, options or convertible instruments in your company.