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FLCORPLAWYER
FLCORPLAWYER, Attorney
Category: Business Law
Satisfied Customers: 4633
Experience:  23 Years business & securities law, NY and FL bars. SEC all states.
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I know corporate stock can be issued in multiple classes, commonly

Resolved Question:

I know corporate stock can be issued in multiple classes, commonly being Preferred and Common stock, each with different rights. Can it be done further than this?

Are restrictions on shares limited to if the share gets overall voting voting rights, or can they effectively be made anything?

I'm working on a few projects with different people under one corporation, but multiple "divisions" where each project is worked on effectively independent of other projects/divisions. I'd like to have a class A with full voting rights across the entire company and other share classes where voting rights are limited to a single division of the company. (Along with maybe more traditional non-voting shares as yet another share class) Can this be done?

Also, how difficult is it to create multiple classes of shares, each with different rules?
Submitted: 4 years ago.
Category: Business Law
Expert:  FLCORPLAWYER replied 4 years ago.
Voting rights cannot be limited to one division of the company because voting relates to the entire company, not each division. There are other ways to give certain people control over certain divisions, by making them managers or officers over those divisions. A Nevada company can have as many classes of common and preferred as you desire, and each class may have whatever vote of the company that you assign to it. Bear in mind that you cannot impair the voting rights of minority shareholders except under specific conditions. Basically, you have to have "control" of the company to create new classes.
Customer: replied 4 years ago.
Managers and officers - I already intend to do that. What I want to know about is investment potential... I'm working with multiple people on multiple projects within this company, each in a different division with different managers/officers, but I doubt an offer like that would appeal to an investor without either incorporating another company for each of the divisons/projects, which is expensive at startup stages, or giving him voting rights in the entire company, which would impact the other divisions the investor didn't care about.

Investors, as far as I know, don't usually go for non-voting stock classes as their stake in a company, correct? They generally like having a say and a measure of control.

Is there any other way to pull this off, other than incorporating something for each division?
Expert:  FLCORPLAWYER replied 4 years ago.
Actually investors are often given preferred stock with no voting rights. Sometimes that stock is convertible into common voting shares at some point in the future. Investors with separate deals should not be brought into the same company at the same time. A few hundred dollars to incorporate a different company for a different project is money well spent. Otherwise a "blow up" in one division is going to rock your whole deal. Make sure you are issuing restricted stock.
Customer: replied 4 years ago.
I see your point entirely.

My issue is this: I'm effectively "partnered" 50-50 (despite technically having full ownership under this corporation) with various people who, as partners, run the different divisions. Most of them don't have much money at all and couldn't incorporate and do all of that - they'd depend on my money, and I don't really want to pay to incorporate a bunch of things where I'm 50% owner when I already am, nor do I really want to go all venture capitalist on them and demand a bigger share in exchange for my "seed investments." I'd love to find a way to do this just under the one name for now... or, with your business background and obvious knowledge here, do you think I should try to give them their own company (with my cash) in exchange for a greater ownership percentage?

I imagine this isn't a problem until outside investors (aka not me) are actually coming in for one of the divisions?

Thanks for all your answers so far!
Expert:  FLCORPLAWYER replied 4 years ago.
Set up separate companies. I have been doing deals for 23 years. The money guy should have about 70% of the company. No money, no deal, right? Remember that if one of these things takes off, and you want it to go public, you want to retain at least 80% of the vote in the company in your control block----the insiders now. So don't be handing out stock like candy.
FLCORPLAWYER, Attorney
Category: Business Law
Satisfied Customers: 4633
Experience: 23 Years business & securities law, NY and FL bars. SEC all states.
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FLCORPLAWYER
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23 Years business & securities law, NY and FL bars. SEC all states.