(not a laywer, not in the US)
Ok, I think your mixing a few concepts together (or I am) ...
- A share is a "thing" you hold which reporesents a "bit" or fraction of a company.
- Dividend. when companies make a profit (income - Expenses) they often pay a dividend on a percentage of that profit (the majoirty of the profit goes back into allowing the company to grow in the next year).
- The dividend (at least in Australia) can be fully franked or on non-franked ... Franked pretty much means the tax has been paid by the company before handing over the money to the shareholder. Non-franked means the tax is the shareholders problem.
- You can have different classes of shares some which allow voting on company direction, some which pay dividends and some which don't.
So you can choose to pay dividends in a company at any point (typically yearly or quarterly), most startups don't pay dividends for the first 5 or 10 years because they are reinvesting every cent back into make the company grow.
Now shareholding ...
If your company has 100 shares, to make the math easy but its more likely to be 1 million shares or something easier to hand out small bits.
Your new sales person would be given 20% (20 shares) in your company, you by default hold the remaining 80% (or 80 shares). When you bring on investors you both give up some of your shares, normally in equal proportion ... you give 30% to a new investor, you give up 24 of your shares and the sales person gives up 6 of theirs.
Ok now you have assigned shareholding you can pay dividends on the shares.
Imagine you make $100,000 profit and decide to pay 10% of that profit as dividends.
This means you have $10,000 to spread amoungst 100 shares therefore $100 per share.
- You have 56 shares thus you get $5600 of the $10,000
- Your sales person gets $1400
- Your investor gets $3000.
The same happens the next year when you split $200,000 in profit.
Voting rights. Same as paying dividends, when it comes to decisions about direction of the company, when to sell out, replacing the CEO and senior staff, when to enter a new market etc the shareholders get together and vote on the direction ... its their money at stake.
On sale of the company. When you sell the company each share is effectively bought from you at an agreed amount say $10,000 per share. You each get paid accordingly.
Does that help answer the question at all?
