What share capital shows
When a corporation issues shares, the amount received is recorded as share capital. It sits in equity alongside retained earnings, which are profits kept in the business. Share capital changes only when shares are issued, redeemed or reorganized, not when the company earns or spends money.
Share capital is not a loan. A shareholder who lends money to the corporation creates a debt, which is recorded as a liability and tracked in the shareholder loan account. The balance sheet should keep those two ideas apart.
Classes of shares and ownership
A corporation can issue more than one class of shares, commonly described as common and preferred. The classes and their rights are set out in the corporation’s articles, so the details depend on how yours was set up. Generally, each share carries one vote, though the articles can differ.
The T2 return asks about ownership. A private corporation completes Schedule 50 if any shareholder holds 10% or more of its common or preferred shares, listing up to the ten largest holders. Schedule 11 reports certain transactions with shareholders, officers or employees, and Schedule 19 applies where a non-resident holds a voting share.
An illustrative example
Two partners each subscribe $50 for 50 common shares, so share capital is $100. One of them also puts $20,000 into the business bank account. If that money is recorded as a loan, share capital stays at $100 and a $20,000 liability appears. If it was meant to be an investment, new shares would normally need to be issued.
The difference affects what can be repaid later without tax consequences, and how the corporation’s books read to a lender.
What to discuss with your accountant
Ask for a current share register: who owns which class, how many shares, and the amount paid for each issue. Check that it matches your minutes, share certificates and the balance sheet.
Raise share capital before adding owners, issuing shares to family members, or redeeming shares. The tax measure of that capital is a separate concept, covered under paid-up capital.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- T2 Corporation – Income Tax Guide – Chapter 2: Page 2 of the T2 returnCanada Revenue Agency
- Archived IT-463R2: Paid-up capitalCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.