Advantages of Shareholder over Director in new Company
I don't know Australian law, but I will give my US perspective here.  The custom in the US is for officers and directors to be indemnified by the corporation, and that LLCs have an even broader power to indemnify (even to remove the duty of loyalty!).  Moreover, directors will typically be able to purchase D&O insurance to protect them from loss in the event of liability. For US corporations (not LLCs), the duty of care (prudence) requires that directors behave responsibly in weighing major decisions, and consult experts and specialists before coming to rash decisions.  It usually becomes a court case in the context of a large public company in the midst of an acquisition event.  The only people with standing (in the US) are shareholders.  If all the other shareholders are directors, then it may be hard for them to blame you. Additionally, if you are concerned about the propriety of your actions, there may be sources to rely on.  First, discussion with your fellow directors can be a helpful guide (though will not usually immunize you from any accusation of wrongdoing), and disclosure tends to cure almost any accusation of breaching the duty of loyalty.  Second, boards often secure the advice of legal counsel, and sometimes bring on lawyers as members or will outright hire counsel for the board.  Third, there may be services that will provide you with generic advice (e.g. UK Companies House and US-based IOD), which might set you at ease a little bit. I don't know the details of Australian law, as I say.  But my sense of common law countries is that, like the US, they are primarily concerned about negligence (incompetently or imprudently neglecting to understand the business and make informed decisions), disloyalty (fraudulently engaging in self-interested transactions that either hurt the company or should have been offered to the company), and recklessness (not bothering to seek out information).  As long as you are active, informed, engaged, and not engaging in secret deals outside the company (especially deals where either side is competing with the company), then that would be more than sufficient under the US standard. If you are concerned about liability, then inquire into indemnifications by the company (in the US, the company can usually pay all legal costs of directors), insurance, and legal counsel.  I imagine your business partners are no more savvy than you are.  My impression is you are overreacting to relatively rare and exotic expression of corporate law (at least in the US). But I'll close by repeating that I don't know Australian corporate law. I know the general principles of acting as a director in a company, and am familiar with the rights of shareholders. In the last ten years or so, I believe Australia has introduced legislation that strongly punishes those directors who do not act in a professional or prudent manner. While I will of course attempt to fulfill the duties required - I am new to conducting business at this level, and am concerned about mistakenly breaching some unknown rule/law and being subject to repercussions that I just don't know about. As you have already stated, the key to being director in a company is the additional responsibility. Legally you can be held in breach. At the same time you will be able to influence your decision much better if you a director and thus safeguard your interest. If you are only a shareholder, you cannot be held responsible for decision by company, individual malpractice may still be applicable, but this is less of a risk. However over a period of time, the board can take certain decision that may marginalize your holding in the company.
"Offset against taxable gains means that the amount - $25 million in this case - can be used to reduce another sum that the company would otherwise have to pay tax on. Suppose the company had made a profit of $100 million on some other investments. At some point, they are likely to have to pay corporation tax on that amount before being able to distribute it as a cash dividend to shareholders. However if they can offset the $25 million, then they will only have to pay tax on $75 million. This is quite normal as you usually only pay tax on the aggregate of your gains and losses. If corporation tax is about 32% that would explain the claimed saving of approximately $8 million. It sounds like the Plaintiffs want the stock to be sold on the market to get that tax saving. Presumably they believe that distributing it directly would not have the same effect because of the way the tax rules work. I don't know if the Plaintiffs are right or not, but if they are the difference would probably come about due to the stock being treated as a ""realized loss"" in the case where they sell it but not in the case where they distribute it. It's also possible - though this is all very speculative - that if the loss isn't realised when they distribute it directly, then the ""cost basis"" of the shareholders would be the price the company originally paid for the stock, rather than the value at the time they receive it. That in turn could mean a tax advantage for the shareholders." IANAL.  In the UK, you (as a Director) would have obligations to minimise any tax liabilities under these two clauses:  http://www.legislation.gov.uk/ukpga/2006/46/section/172  http://www.legislation.gov.uk/ukpga/2006/46/section/174  Although I can't see the CPS bringing any cases of criminal charge against over-payment of taxes. It wouldn't be unrealistic to have a scenario where shareholders of a failed enterprise sued a Director who was negligent in minimising tax liabilities.  That said, I think the Starbucks strategy is flagrantly breaching the intent of the law, if not the letter. Shareholders have voting rights, and directors have fiduciary obligations to shareholders. Sure, shareholders have rights to the dividends, but stock confers decisionmaking powers. I'm not really sure what your answer to this is, or how you are differentiating the concept of ownership from this. You go public to raise money, to invest in the business and/or pay off the existing shareholders. It's really as simple as that. The advantage of being public is that your shares can easily be bought and sold, and so you can issue and sell new ones and your existing shareholders can sell out if they want to. The disadvantage is that you are much more tightly regulated, with more disclosure requirements, and also that you are exposed to much more pressure from your shareholders to maintain and increase your share price. "Not normally, for a limited liability company anyway. In extreme circumstances a court may ""lift the veil"" of incorporation and treat shareholders as if they were partners. If you are an office bearer or a director that is found to have breached duties/responsibiities then that is another matter. Dim views can be taken of shonky arrangents for companies formed for activites not of a bona fide business nature too." My understanding is you can create a company 0 value. Then you need to either loan the company the money to buy the building (it will still have 0 value as it will have a debt equal to it's assets) or sell share to investors at any price you like to raise the money to buy the building.  Once shares have value (as valued by a chartered accountant - not anyone can do this) then anyone recieving shares will have to pay income tax. This is why keeping the shares as no value for as long as possible can be preferable. Also a benefit of using share options. talk to your investors, see what they require. Another person, not a shareholder or director, will be treated as when a bank loans you money. You are loaning out money and you are sort of getting interest income out of it or some other benefit, which needs to be put down in you company's annual return. Full source on the HMRC website. But for a shareholder or director is different matter. Check the HMRC source for sure and check with your accountant, if you have one. If you owe your company money You or your company may have to pay tax if you take a director’s loan. Your personal and company tax responsibilities depend on how the loan is settled. You also need to check if you have extra tax responsibilities if: If the loan was more than £10,000 (£5,000 in 2013-14) If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must: You must report the loan on your personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest. If you paid interest below the official rate If you’re a shareholder and director, your company must: You must report the interest on your personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid. "You are confining the way you and the other co-founders are paid for guaranteeing the loan to capital shares. Trying to determine payments by equity distribution is hard. It is a practice that many small companies particularly the ones in their initial stage fall into. I always advise against trying to make payments with equity, weather it is for unpaid salary or for guaranteeing a loan such as your case. Instead of thinking about a super sophisticated algorithm to distribute the new shares between the cofounders and the new investors, given a set of constraints, which will most probably fail to make the satisfactory split, you should simply view the co-founders as debt lenders for the company and the shareholders as a capital contributor.  If the co-founders are treated as debt lenders, it will be much easier to determine the risk compensation for guaranteeing the loan because it is now assessed in monetary units and this compensation is equal to the risk premium you see fit ""taking into consideration the probability of default "". On the other hand, capital contributors will gain capital shares as a percentage of the total value of the company after adding SBA loan."