What’s the difference between shares and stocks?

The terms are often used interchangeably, though “stock” more commonly refers to ownership units in publicly traded companies, while “shares” is used more broadly, including for privately held companies. In everyday conversation, most people use the two terms without much distinction.

Do I need to issue shares to raise money for my small business?

No, issuing shares is one option among several, including debt financing or personal capital, and it’s generally more relevant for businesses seeking equity investment from outside investors. Most very small businesses raise capital through loans or personal savings rather than formally issuing shares.

Can shares be issued to someone outside the country?

In principle, yes, though issuing shares to an international investor adds legal and tax complexity that a purely domestic transaction wouldn’t have, including considerations around securities regulations and tax treaties. This is an area where consulting a business attorney familiar with cross-border transactions is genuinely worthwhile before proceeding.

Back to Glossary

Shares: what owning a piece of a company actually means

Key takeaways
- A share represents a unit of ownership in a company.
- Shares can be issued by a business to raise capital, giving the buyer a stake in future profits or growth.
- For a small, privately held business, issuing shares is a formal decision with legal and tax implications.
- “Shares” and “stocks” are often used interchangeably, though “stock” more commonly refers to publicly traded companies.
- Understanding shares matters for both small business owners considering equity financing and for anyone starting to invest.

A share represents a unit of ownership in a company. Here’s what that means, and what happens when shares are used to raise capital for a business.

What are shares in a company?

A share is a unit of ownership in a company. Owning a share generally entitles the holder to a proportional claim on the company’s profits and, in many cases, a vote on certain company decisions. Companies can issue shares to raise capital, with investors purchasing shares in exchange for providing that capital, becoming part-owners of the business as a result.

Why understanding shares matters for business owners and investors

For a small business considering equity financing⁠(opens in new window), issuing shares means giving up a portion of ownership and, typically, some level of decision-making input in exchange for capital. This is a formal, often legally significant step that generally requires proper documentation, valuation, and sometimes legal counsel to structure correctly.

For someone new to investing, understanding shares is foundational:

Buying a share of a publicly traded company provides a small ownership stake and a claim on future profits, often distributed as dividends.
A company’s total shares outstanding, multiplied by the price per share, gives a rough measure of the company’s total value, known as market capitalization.
Private company shares work similarly in concept but aren’t traded on a public exchange, making them harder to value and sell.

Record-keeping tip

Keep a formal, dated record, sometimes called a cap table, listing everyone who holds shares, how many, and when they were issued. This document is essential for accurate tax reporting, for any future fundraising round, and for resolving any dispute about ownership percentages down the line.

Shares and international business payments

For immigrant entrepreneurs considering equity financing or employee ownership as part of growing a business, understanding shares is a prerequisite before entering that kind of arrangement. A business with ties to a company or investors abroad faces additional legal and tax considerations when structuring a share arrangement across borders that a purely domestic arrangement wouldn’t involve, making professional legal and tax guidance especially worthwhile before finalizing any agreement.

For those newer to investing broadly, understanding venture capital investment basics⁠(opens in new window) provides useful context for how shares function in a startup or growth-stage business context specifically, which differs somewhat from buying shares of an established, publicly traded company. If that growth involves paying international contractors or partners as the business scales, Remitly Business⁠(opens in new window) is built for exactly that kind of cross-border operational payment.

Common versus preferred shares

Common shares typically come with voting rights but rank behind other obligations if a company is liquidated, while preferred shares often lack voting rights but receive priority for dividend payments and in a liquidation, a tradeoff between control and financial priority worth understanding if either type is ever offered.

Why small businesses rarely issue shares in the traditional sense

Most small, closely held businesses, particularly a sole proprietorship or a simple LLC, don’t issue shares in the way a corporation does, reserving this structure primarily for a business that has incorporated and is seeking to raise capital⁠(opens in new window) from outside investors or offer equity to employees.

Why a shareholder agreement matters even among family or friends

Issuing shares to a family member or close friend as an early investor still calls for a formal shareholder agreement addressing what happens if one party wants to sell, disagrees with a major decision, or the business struggles, since this protects the relationship as much as it protects the business itself.

Why a buy-sell agreement matters for closely held shares

A buy-sell agreement establishes in advance what happens to a shareholder’s stake if they want to leave, become unable to continue, or pass away, preventing a difficult, unstructured negotiation during an already stressful moment, worth establishing early even among shareholders who currently get along well.

Common questions about shares

What’s the difference between shares and stocks?

The terms are often used interchangeably, though “stock” more commonly refers to ownership units in publicly traded companies, while “shares” is used more broadly, including for privately held companies. In everyday conversation, most people use the two terms without much distinction.
Do I need to issue shares to raise money for my small business?

No, issuing shares is one option among several, including debt financing or personal capital, and it’s generally more relevant for businesses seeking equity investment from outside investors. Most very small businesses raise capital through loans or personal savings rather than formally issuing shares.
Can shares be issued to someone outside the country?

In principle, yes, though issuing shares to an international investor adds legal and tax complexity that a purely domestic transaction wouldn’t have, including considerations around securities regulations and tax treaties. This is an area where consulting a business attorney familiar with cross-border transactions is genuinely worthwhile before proceeding.

In Summary

A share represents a real stake in a company’s ownership and future, whether for a business owner considering issuing shares to raise capital or an investor considering buying them. For immigrant entrepreneurs exploring equity financing, or with ties to investors abroad, understanding the basics of how shares work is the necessary foundation before entering into any formal ownership arrangement.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.