For a private company, is there a limit to the number of people that can be co-owners?
I have asked several people and got different answers. If I keep my company private is there any regulation as to the number of shareholders in my company?
The U.S. Securities Exchange Act of 1934, section 12(g), generally limits a privately held company (for example, a regular C corporation) to less than 500 shareholders. The assumption has been that companies with 500 investors are essentially anyway, and for disclosure and other reasons should be forced to go public (i.e., file the necessary registration and disclosure documentation in order to be treated as if a publicly-traded company) when the shareholder number approaches this 500-party limit. Please note that LLCs and Subchapter S corporations have a legal limit of no more than 100 shareholders by virtue of the Internal Revenue Code. Please consult with an experienced securities attorney for more precise information regarding your specific plans and circumstances.
If it is an S Corp there is a limit of 100. If it is a LLC there is no limit.
Hi Karl, you might want to check with your local office on this. However, in most countries there's no such cap. It is generally based on the share holding pattern. However, it is advisable to keep as few partners as possible - 2 to 4 at most. Remember, too many cooks spoil the broth!
Ray is correct. If it is a Sub S corporation, there is a limit of 100 shareholders and there are limitations on the kinds of shareholders (i.e., a shareholder may not be a partnership or corporation formed for the purpose of investing in this sub S). If it is a C Corp or an LLC, there is no limit on the number of shareholders.
Talk to your business attorney. He or she can offer the advice and the answers you need. For questions like these, nothing beats talking to a professional.
@Ray @Jerry: I'm no tax guy, but I believe that an LLC that has elected to be taxed as an S corporation is subject to the same 100-owner constraint as the pure S-corporation is, isn't it?
as long as you have less than 500 shareholders, your company would have no public company reporting requirements
I am sorry it has taken me so long to respond, but life happens. I want to thank everyone for your response