Must a for-profit corporation use share-based ownership?

Question

Generally, corporations are structured so that ownership is represented by shares, and a person can own any number of shares.

Is this structure required by law? Or can corporations be created that use a different mechanism to represent or determine ownership?

For example, I might like to create a corporation which is always owned by the owner of a particular commemorative plate, or a corporation which has equal ownership stakes always owned by all its current employees. These would be much easier to specify if I could just directly define the current ownership stakes and set of owners, rather than needing to phrase them in terms of required issuances and transfers of shares.

Answer 1

These would be much easier to specify if I could just directly define the current ownership stakes and set of owners, rather than needing to phrase them in terms of required issuances and transfers of shares.

The issue here is mostly one of terminology rather than what is possible to do.

For example, I might like to create a corporation which is always owned by the owner of a particular commemorative plate,

This is legally called a negotiable share of stock in bearer form. Historically, this was legal in the United States for corporations not taxed on a passthrough basis. But, under current U.S. law, the ownership of many closely held companies must be disclosed to the federal government under the Corporate Transparency Act so an ownership structure in which management doesn't know who its shareholders are at any given time isn't allowed.

corporation which has equal ownership stakes always owned by all its current employees

This goal could be achieved either with an employee stock ownership program (ESOP), or by organizing the corporation as a worker's cooperative.

In a small firm, a partnership or limited liability company could be used for this purpose. Professional firms like law firms and accounting firms and doctor's offices are often organized on this basis (with non-professionals legally forbidden from having an ownership interest).

A somewhat similar arrangement, usually organized as a non-profit, is a homeowner's association, in which one share of ownership is attached to ownership of a residence in the association.

Producer's cooperatives such as farmer's cooperatives and the New York Stock Exchange, are often organized on something similar to this basis.

Mutual companies such as mutual insurance companies and credit unions, and consumer cooperatives, like many college bookstores and many farmer's cooperatives, are owned by people who purchase goods from the company, typically in proportion to their annual patronage.

Answer 2

No

australia

A corporation in Australian law is a non-natural legal person. They come in many types.

Companies under the Commonwealth Corporations Act

There are three categories, each with different substructures:

• Proprietary (private) companies may be limited by shares or have unlimited liability with share capital.
• Public companies may be limited by shares, limited by guarantee, have unlimited liability with share capital, or be a no liability company.
• Corporate collective investment vehicles must be limited by shares.

Companies limited by shares are the main type of vehicle for for-profit businesses in Australia, but they are not the only ones.

Unlimited and no liability companies are restricted exclusively to the mining industry, but ownership is still represented by shares.

There are no shares in companies limited by guarantee - when you become a member, you agree to pay the (usually nominal) guarantee amount if the company is wound up. However, these cannot pay dividends and are typically used for not-for-profit enterprises like running registered clubs.

Co-operatives

Co-operatives are member-owned state-regulated entities, but since 2020, all states have the same uniform laws about them. They can be distributing or non-distributing; distributing co-ops are suitable for running a for-profit business.

This would be the ideal structure for an employee-owned business.

Incorporated Associations

These are member-owned state-regulated entities suitable for small not-for-profits (larger ones would typically use a corporation limited by guarantee). Basically all local clubs like junior football clubs use this model.

Statutory corporations

A company created by a specific statute, typically used to operate a state-owned enterprise. Many of these are for-profit. For example, Sydney Water is a statutory corporation.

Corporation sole

A corporate entity embodied in a single titular head — for example, the Minister for Defence or the Anglican Archbishop of Sydney.

Answer 3

british-columbia

All companies and cooperative associations must use the concept of shares to represent the ownership or membership.

See the Business Corporations Act and the Cooperative Associations Act.

Of course, there are other forms of organization: partnerships, strata corporations, webs of contracts, etc.