Multiple Share Classes at Incorporation Calculator
Authorising extra share classes at incorporation costs nothing extra in government fees. Adding them once the shares have value costs an amendment plus a reorganisation. Work out what to authorise now.
cost avoided
—
—
—
—
Now Against Later
| Item | At Incorporation | Added Later |
|---|
Suggested Share Structure
| Class | Purpose | Needed |
|---|
TOSI on the Dividends You Are Planning
| Shareholder | Position | Dividends |
|---|
Points That Decide This
What to Do Next
—
Disclaimer: Government fees are stated as $150 for Ontario articles of amendment and $200 federally, and should be confirmed against the current fee schedule at the time of filing. Professional fees shown are indicative fixed fees including HST, confirmed in writing before any engagement begins. Authorising additional classes of shares in the articles at incorporation does not attract an additional government fee, because the articles are filed once regardless of how many classes they describe. Authorising a class is not the same as issuing shares of it, and an authorised but unissued class has no tax consequence. Adding a class after incorporation requires articles of amendment, and where the existing shares have accrued value, moving that value into a new structure generally requires a reorganisation under section 86 or a transfer under section 85, each of which carries professional and valuation cost that scales with the value involved. The tax on split income in section 120.4 applies the top marginal rate to dividends received by a specified individual from a related business unless an exclusion applies, including the excluded business exclusion where the individual is actively engaged on a regular, continuous and substantial basis, generally an average of 20 hours a week, and the excluded shares exclusion which is not available to individuals under 25. Separate share classes enable different dividend amounts but do not create a TOSI exclusion by themselves. A corporation’s articles should be drafted by a lawyer, and share structure decisions involving family members, investors or a future freeze should be taken with both tax and legal advice. This page is general information, not tax or legal advice.
Authorising Costs Nothing, Adding Later Costs Plenty
The articles are filed once. Whether they describe one class of shares or five, the government fee is the same. Authorising extra classes at incorporation is close to free.
Adding a class afterwards means articles of amendment. That alone is modest. The expensive part arrives when the existing shares have accrued value, because moving that value into a new structure needs a section 86 reorganisation or a section 85 transfer, with a valuation to support it.
| When | What It Takes | Rough Cost |
|---|---|---|
| At incorporation | Drafting the articles to include the classes | $35 |
| Later, company still worth little | Articles of amendment | $185 |
| Later, company has real value | Amendment plus a section 86 reorganisation and valuation | Thousands |
The cost of fixing a share structure scales with the value of the company. That is the entire argument for doing it at incorporation, when the company is worth nothing and the reorganisation is unnecessary.
Authorised Is Not Issued
This is the point that makes the decision easy. Authorising a class of shares in the articles does not mean anyone holds them. An authorised but unissued class sits there costing nothing and doing nothing until you need it.
There is no tax consequence, no filing obligation and no complexity from having classes you have not used. The only cost is a slightly longer set of articles.
The mistake is incorporating with a single class of common shares because it seemed simpler. It is simpler, right up to the point where you want to pay a different dividend to a spouse, bring in an investor, or freeze your value for the next generation. Then it is expensive.
What Each Class Is Actually For
- Class A common, voting, held by you, carrying control
- Class B common, non-voting, for a spouse or adult children, so dividends can differ without giving away control
- Class C common, non-voting, a second family class where amounts need to differ between recipients
- Preferred, redeemable and retractable, for a future estate freeze, holding the frozen value
- Investor class, with the rights an investor will negotiate anyway
Separate classes exist so dividends can be declared at different amounts on different shares. With one class, every shareholder receives pro rata, and pro rata is exactly what a family structure is trying to avoid.
Separate Classes Do Not Defeat TOSI
This needs saying plainly, because the two get conflated. Share classes are a mechanism for paying different dividend amounts. They do not create an exclusion from the tax on split income.
A spouse holding Class B shares who is not active in the business and does not meet an exclusion is taxed at the top marginal rate on those dividends regardless of how elegant the structure is.
| Recipient | TOSI Position |
|---|---|
| Working 20+ hours a week in the business | Excluded business, dividends taxed normally |
| Aged 25 or over holding excluded shares | May be excluded, conditions apply |
| Spouse not active, holding non-voting shares | Top rate applies |
| Adult child at university, not working in the business | Top rate applies |
The structure is still worth having. Circumstances change, a spouse may become active, children grow into the business, and the excluded shares exclusion opens at 25. Having the classes ready costs nothing and the flexibility is the point.
The Estate Freeze Argument
A freeze exchanges your growth shares for fixed-value preferred shares, so future growth accrues to the next generation instead of to you. It caps your eventual capital gain and moves the growth to shares your children or a family trust hold.
It needs preferred shares to be available. Where the articles authorise only common shares, the freeze starts with an amendment, and by then the company has the value that makes everything harder.
Most owners do not know at incorporation whether they will ever freeze. That is fine. Authorising the preferred class costs nothing and being wrong about needing it costs nothing either.
What Investors Will Want
An outside investor will negotiate their own class with their own rights, so you cannot fully pre-empt that. What you can do is not start from a position where the company has one class of common shares and every change requires unpicking it.
Articles that already contemplate multiple classes make the round cleaner and cheaper, and that shows up in legal fees at exactly the moment when attention is scarce.
What This Calculator Does Not Cover
- Drafting the articles, which is legal work
- The rights and restrictions attaching to each class, which need care
- Whether to use a family trust to hold a class rather than individuals
- Shareholder agreements, which matter more than the classes once there are several holders
- QSBC status, which the share structure can affect
- Provinces other than Ontario
Decide the classes before the articles are filed, not after. Our incorporation service covers the structure discussion, the articles and the first year of filings.
Frequently Asked Questions
Common questions on share classes at incorporation.
Related Calculators and Guides
More tools for owners setting up a corporation.
Settle the Structure Before the Articles Are Filed
Tell us who will hold shares, whether an investor is coming and whether a freeze is likely. We will set the classes, coordinate the articles and register the corporation with the structure right from day one.