Dividends

Can I Pay Different Dividends To Shareholders – What Are Dividends?

Shareholders

This article discusses dividends and whether you can pay the varied amount from the dividend to your shareholders. Tag along till the end of the article to know all the details clearly so that you do not make any mistakes. 

Can I Pay Different Dividends To Shareholders

Let Us First know What Dividends Are?

Every huge established company has shareholders that hold some stake of the company’s ownership in the subject. All these shareholders are liable to get payments which are known as dividends. Shareholders are given this payment as a part of the profit they share in the business, which the company does not interest in investing but giving away to the co-owners. 

Coming back to the question, “Can I Pay Different Dividends To Shareholders?”

Well, yes, it is possible to pay different dividends to your shareholders, and this article discusses further in detail. 

How Do Dividends and Shares Work?

As and while the company grows, the number of equity shares expands, and so do the number of shareholders. Shareholders of a company may not hold the same part of the company; some have more than others, depending upon the percentage of the company they own. 

Using the percentage of shares, the amount of dividend is calculated. This amount is the profit of what Mr A invested in the said business. For example, if Mr A has acquired 20% of the entire company, they will get 20% off as return profits. Furthermore, dividend amounts are subject to dividend tax.

There are various types of shares; Alphabet Shares being prominent can make things a bit confusing that they already are. So, let us know what alphabet shares are?

Alphabet shares allow flexibility over the rates of dividends and the rights given to the individual family member. The spouse of the company’s owner may own some of the shares excluding voting rights or seldom with limited voting rights. That’s when alphabet shares can be implemented, allowing employees to be a part of the dividend share. 

The shares are given to the employees as a part of their remuneration or salary. Depending upon the company rules, these shares can be given to the employees as incentives. 

Why Pay Different Dividends to Shareholders. What Are Its Advantages?

Universally it seems fair to divide the company’s profit equally, but by choosing the different dividend methods, you can expand the company’s limits. Instead of paying the shareholder the entire profit, the scheme allows the company to pay them only the share of their investment and involvement in the company. 

This method benefits you from appointing your family member’s spouse or child who can get dividends without giving them voting rights. 

It also allows you to own most of your business by giving the directors a larger share of the profits than the whole company. 

How do you let the Shareholders know About this? 

Pearson McKinsey is an accountant and finance firm based in London, and we provide you with 100% genuine assistance on financial matters. You will have to inform the company and all the stakeholders about the changes in the dividend payment structure. To get more guidance on dividends and taxes, make sure you get in touch with us today.