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A shareholder is someone who, quite literally, holds shares in a limited company. Shares are basically units of ownership, so if you hold all of the shares, it means that you own 100% of the company.

What does a shareholder do?

Who can own shares in a company?

How do I become a shareholder?

The benefits of being a company shareholder

Do shareholders pay tax?

Shareholders don’t necessarily need to be involved in the daily management of a company, but they might influence it in other ways. Depending on the type of shares that they own, a shareholder may have voting rights allowing them to have a say on any major decisions about the company, such as:

The extent of their decision-making abilities depends on how many shares they own. For example, if a company is owned by two shareholders, one of whom owns 75% of the shares, they have more voting power than the other shareholder.

Are shareholders different to directors?

In very basic terms, shareholders own the company and directors run it. They have different roles and responsibilities, but a shareholder and director can also be the same person! It’s particularly common in smaller businesses.

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A shareholder can be an individual, or even another entity such as a limited company, partnership, or organisation. Companies House are planning to introduce a new system for verifying the identity of company shareholders and directors, although this is not yet in place so you don’t need to do anything differently for now.

It depends! You might be a shareholder because you incorporated your own limited company, but this isn’t the only way. For example, you might:

Being a shareholder usually means you’re entitled to make decisions about the company, and to receive a share of the company’s profits known as a dividend payment. The dividend payment that you receive is worked out based on the volume and type of shares that you own.

Dividends are taxed at a lower rate than Income Tax and you won’t need to make National Insurance contributions on them, so they can be quite a tax-efficient way to receive income!

Dividends are a source of income, so shareholders will need to pay tax on any they receive if the total amount is more than the £1,000 Dividend Allowance during the 2023/24 tax year.

They’re not taxed at source like money from an employer usually is, so you’ll need to submit a Self Assessment tax return to report what you receive to HMRC, and pay any Dividend Tax that you owe.

Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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