When establishing a new company, choosing between natural person shareholders and legal person shareholders is a crucial decision that will directly affect the company's management style, governance structure, and future development direction. The advantages and disadvantages brought by different types of shareholders will directly impact the company's operations and development trajectory. Let's explore some considerations when choosing between natural person shareholders and legal person shareholders.

I. Differences between Natural Person Shareholders and Legal Person Shareholders

Natural Person Shareholders

(1) Flexibility: As shareholders, natural persons can more easily determine the company's business direction and development strategy, offering greater flexibility.

(2) Personal Resources: Natural persons as shareholders can bring personal resources, including connections, experience, and professional knowledge, which positively impact the company's development.

(3) Trust: There may be a higher level of trust among natural persons, which helps to establish closer cooperative relationships and shared goals.

Advertisement

Disadvantages:

(1) Personal Liability: As shareholders, natural persons bear personal risks and responsibilities, which may affect their personal property.

Legal Person Shareholders

(1) Stability: Legal person shareholders can provide a more stable foundation for the company's operations and governance.

(2) Financial Strength: Legal person shareholders, often being companies themselves, can bring financial strength and resources to the company.

(3) Professional Management: Legal person shareholders may lead to a more professional management structure within the company.

Disadvantages:

(1) Bureaucracy: The involvement of legal persons can sometimes lead to increased bureaucracy and decision-making delays.

(2) Limited Personal Connection: The relationship between a company and its legal person shareholders may lack the personal connection and trust that can exist with natural person shareholders.

(3) Complex Legal Requirements: Legal person shareholders may be subject to more complex legal requirements and regulations, which can add to the administrative burden of the company.

In conclusion, the choice between natural person and legal person shareholders should be made based on the specific needs and goals of the company, taking into account the potential advantages and disadvantages of each type of shareholder.Inheritance Issues: When a natural person serves as a shareholder, unexpected incidents or changes may lead to issues of equity inheritance and transfer.

Legal Person Shareholders

Advantages:

(1) Legal Protection: As a shareholder, a legal person has relatively lower responsibilities and risks, and is provided with certain legal protections.

(2) Capital Strength: As a shareholder, a legal person may possess stronger capital strength, which is beneficial for the company's development and expansion.

(3) Tax Benefits: Some regions offer tax incentives to legal person shareholders, which can help reduce company costs.

Disadvantages:

(1) Management Complexity: As a shareholder, a legal person may need to comply with more laws, regulations, and rules, making management relatively complex.

(2) Decision-Making Power: As a shareholder, a legal person may focus more on the company's profits and interests, potentially leading to disagreements with other shareholders in decision-making.II. Differences in Profit Distribution Methods

Individual Shareholders

Individual shareholders are required to pay personal income tax on dividends and bonuses according to the relevant regulations of personal income tax, with the tax rate typically being 20%.

Legal Person Shareholders

Legal entities, as shareholders, receive dividends from their subsidiaries' after-tax profit distributions, which are generally exempt from corporate income tax. This is because the profits have already been subject to corporate income tax at the subsidiary level. Such tax arrangements help to avoid double taxation and promote the effective flow of funds within the group.

Individual shareholders face personal income tax, while legal person shareholders may enjoy tax exemptions or lower tax rates.

In summary, the choice between individual shareholders and legal person shareholders depends on the specific circumstances and operational needs of the company. When making a choice, it is necessary to consider the advantages and disadvantages of each and make the most suitable decision based on the actual situation of the company. It is best to consult with professionals such as lawyers and tax experts before choosing shareholders to avoid subsequent problems and disputes.

Follow me to learn more about financial and tax tips!