Dissolving/breaking up a business
Discussion
After some advice
If two friends were in business together and had a very successful company (ltd Company) that has been trading for many years, and had in the and had in the last couple of years started a 2nd business (which is completely different to the original business) but trades under the Ltd Co name - XXXX is a trading name of XXXXXX Ltd.
Now if one of the directors felt that he had 'served his time' (so to speak)and wanted to move on (from the original business) but would like to keep/take the 2nd business (as he set it up and has done all of the work - although the Original Company has financed it, and owns all of the assets under the Ltd co name)
How would this be approached?
At this moment in time Director 'B' is unaware that Director 'A' is considering putting this to him.
Is it possible to do such a thing, would there be any implications?
The original company has a firm client base, lots of regular business from this client base, and has a lot of assets - (mainly vehicles and equipment, probably split 65% - 30% in favour of the original business.) Turnover wise the companies as a whole do very well (probably split 70% - 30% in favour of the original company)
So the 2nd business does not have as many assets as the first and doesn't turn over as much money - how would such a split take place (if it can be done)
TIA
So director B wants to buy 30-35% of the company's trade, and owns 50% of the share capital.
Director B could potentially buy the trade of the 2nd business with a proportion of his shares. I see three options:
- B transfers some of his shares to A in return for the trade of the 2nd business, and retains a minority shareholding.
- A buys out the rest of the shares in order to become the sole shareholder.
- If B needs to convince A and wants to sweeten the deal, so offers all of his shares in return for the trade of the 2nd business.
I would suggest that B obtains independant advice from accountants and lawyers before approaching A
Director B could potentially buy the trade of the 2nd business with a proportion of his shares. I see three options:
- B transfers some of his shares to A in return for the trade of the 2nd business, and retains a minority shareholding.
- A buys out the rest of the shares in order to become the sole shareholder.
- If B needs to convince A and wants to sweeten the deal, so offers all of his shares in return for the trade of the 2nd business.
I would suggest that B obtains independant advice from accountants and lawyers before approaching A
'B' would probably let 'A' take/buy/have the second business
as he doesn't have and certainly wouldn't have a clue about keeping it running - It's 90% Director 'A's name and who he knows that keeps it going.Would there be any major tax implications on splitting the business?
The main Ltd Company owns all of the vehicles plant and equipment that Director 'A' would need to continue with the 2nd business. How would this work? would 'A' need to buy the vehicles/equipment from the Ltd company
thus entitling him to 50% of his money back (as a 50% shareholder in the main company)Hmm! this could get confusing.
IIRC there is a P'Her that buys and strips/sells businesses ???
Pagey said:
Would there be any major tax implications on splitting the business?
The main Ltd Company owns all of the vehicles plant and equipment that Director 'A' would need to continue with the 2nd business. How would this work? would 'A' need to buy the vehicles/equipment from the Ltd company thus entitling him to 50% of his money back (as a 50% shareholder in the main company)
That would be the accountant's advice I mentioned. I'm not one The main Ltd Company owns all of the vehicles plant and equipment that Director 'A' would need to continue with the 2nd business. How would this work? would 'A' need to buy the vehicles/equipment from the Ltd company
thus entitling him to 50% of his money back (as a 50% shareholder in the main company)If part of the business is sold off, there will probably be some sort of "consideration" passing from the buyer to the seller. This consideration could be "cash" but it could be in some other form - such as share transfers or cancellation of loan accounts or transfer of assets. Whatever way it happens, the seller could be liable to a Capital Gains Tax charge on the proceeds of the part disposal of the business/company.
The tax rules on the disposal of a business or business assets are changing dramatically on 6 April 2008 and anyone considering disposing of a business or business asset in the near future should talk to their accountant without undue delay.
The tax rules on the disposal of a business or business assets are changing dramatically on 6 April 2008 and anyone considering disposing of a business or business asset in the near future should talk to their accountant without undue delay.
Not necessarilly - the company accountant has a respnsibility to BOTH shareholders/directors of the company. However, if he is approached by one director regarding this issue, he isn't obliged to inform the other director - at least not initially.
If the company accountnat doesn't act for the directors' personally, then either of the directors could seek outside advice from a different accountant. If he DOES act for the directors, then another accountant might be limited in the type of professional advice he can give.
If the company accountnat doesn't act for the directors' personally, then either of the directors could seek outside advice from a different accountant. If he DOES act for the directors, then another accountant might be limited in the type of professional advice he can give.
Eric Mc said:
If part of the business is sold off, there will probably be some sort of "consideration" passing from the buyer to the seller. This consideration could be "cash" but it could be in some other form - such as share transfers or cancellation of loan accounts or transfer of assets. Whatever way it happens, the seller could be liable to a Capital Gains Tax charge on the proceeds of the part disposal of the business/company.
The tax rules on the disposal of a business or business assets are changing dramatically on 6 April 2008 and anyone considering disposing of a business or business asset in the near future should talk to their accountant without undue delay.
The tax rules on the disposal of a business or business assets are changing dramatically on 6 April 2008 and anyone considering disposing of a business or business asset in the near future should talk to their accountant without undue delay.
If the company was to sell part of its fleet of vehicles (i.e the vehicles used in the 2nd business am I correct in thinking that there would not be any 'capital gain' as the vehicles have lost a lot in depreciation from when they were purchased.
Eric Mc said:
Not necessarilly - the company accountant has a respnsibility to BOTH shareholders/directors of the company. However, if he is approached by one director regarding this issue, he isn't obliged to inform the other director - at least not initially.
If the company accountnat doesn't act for the directors' personally, then either of the directors could seek outside advice from a different accountant. If he DOES act for the directors, then another accountant might be limited in the type of professional advice he can give.
If the company accountnat doesn't act for the directors' personally, then either of the directors could seek outside advice from a different accountant. If he DOES act for the directors, then another accountant might be limited in the type of professional advice he can give.
The accountant does all of the company accounts etc and has done for years
and also does the Directors Tax returns, and has also acted for Director 'B' during another independant business venture.
Thanks for all of your advice so far
Most assets on which Capital Allowances have been claimed will not be subject to Capital Gains tax on disposal- unless the disposal proceeds are greater than the original cost. This is normally quite unusual for ordinary depreciating type business assets - but not that unusual for business owned land and buildings.
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