Is it better to make someone a shareholder or director?
Discussion
I've run my business for a couple of years now; it is self-funded using my own capital. It is a Ltd Co., and I am the sole shareholder and Director.
I've got to the point where my accountant has suggested bringing in my (life) partner so that we can share a bit of the tax about. So far I have resisted this, for various reasons, but with a slight change in personal circumstances in recent weeks I have to agree that it would be useful to be able to take some more money out of the business without altering my own personal tax situation.
The options for diverting tax liability seem to be Director (with or without shares) or Shareholder (with or without Directorship). Is there any benefit for any of these options?
My concerns are that I wish to protect the equity I have in the business as I might need it for strategic partnerships later on, but I also don't want to lose creative control on the business direction as up until now it has been entirely my project. At present my partner has no input to the business - but may in the future. The max share option in either case is 5%.
Any opinions on the matter are gratefully received!
I've got to the point where my accountant has suggested bringing in my (life) partner so that we can share a bit of the tax about. So far I have resisted this, for various reasons, but with a slight change in personal circumstances in recent weeks I have to agree that it would be useful to be able to take some more money out of the business without altering my own personal tax situation.
The options for diverting tax liability seem to be Director (with or without shares) or Shareholder (with or without Directorship). Is there any benefit for any of these options?
My concerns are that I wish to protect the equity I have in the business as I might need it for strategic partnerships later on, but I also don't want to lose creative control on the business direction as up until now it has been entirely my project. At present my partner has no input to the business - but may in the future. The max share option in either case is 5%.
Any opinions on the matter are gratefully received!
13m said:
Buffalo said:
Any opinions on the matter are gratefully received!
Here's one: Ask your accountant what you're paying him for and why you need to seek advice on a car forum.
Besides I have three opinions from my accountant: Her preference personally; the most tax efficient option; and the option she could best present based on my preference at the time.Now I've had time to think though, I can see pros and cons on either option and I want to challenge my initial decision. I was hoping to hear from those who have had to make that first decision to carve up something they've created themselves, what they choose to do and why.
The simple point to consider is - how important is saving tax to you compared to all the other aspects of allowing someone having a stake in your business?
Taking on a business partner (even one with a minority shareholding) is the business equivalent to a marriage.
If you aren't keen on marriage in the general sense, perhaps you should think carefully about a "business marriage".
Taking on a business partner (even one with a minority shareholding) is the business equivalent to a marriage.
If you aren't keen on marriage in the general sense, perhaps you should think carefully about a "business marriage".
I wouldn't worry about it. Unless there are agreements in place to the contrary, anyone with a minority shareholding has the sum total of f-all rights and control. I got muscled out of my 33.3% shareholding with ease and for a pittance and despite using very expensive lawyers, I didn't have a leg to stand on anywhere.
Brief overview of minority shareholder rights.
http://uk.practicallaw.com/5-613-3685
It gets more complicated if the shareholder is also a director.
http://uk.practicallaw.com/5-613-3685
It gets more complicated if the shareholder is also a director.
Correct. Ensure the level of shareholding is not frivolous i.e. Min 5% though I did 8%. There are ER reasons for this.
If you exclude voting rights you are creating a condition on the share transfer that HMRC could challenge. Give the shares unconditionally and draw up a shareholders agreement to formalise the arrangement.
A directorship makes the other person an office holder which has ER and NMW repercussions. I did this.
Best wishes.
If you exclude voting rights you are creating a condition on the share transfer that HMRC could challenge. Give the shares unconditionally and draw up a shareholders agreement to formalise the arrangement.
A directorship makes the other person an office holder which has ER and NMW repercussions. I did this.
Best wishes.
13m said:
Buffalo said:
Any opinions on the matter are gratefully received!
Here's one: Ask your accountant what you're paying him for and why you need to seek advice on a car forum.I also have a long term partner and have my own Ltd company. My Accountant has specifically told me not to pay her anything other than an fair rate of pay for any work she does for the company.
I'm going through something similar albeit in the very early stages..
It's my understanding that if you 'Gift' shares there is still tax to pay on the value of the shares which you will be responsible for..Or you pass that tax on to to partner which will be held until such time she either sells/gifts her shares or the company closes.
It's my understanding that if you 'Gift' shares there is still tax to pay on the value of the shares which you will be responsible for..Or you pass that tax on to to partner which will be held until such time she either sells/gifts her shares or the company closes.
Since the change in dividend taxation the savings to be made are much lower.
Unless you have a major change of heart from the sentiment in your op I don't think its a route worth going down on the one hand from a dilution of control and on the other possible avoidance investigation from HMRC.
Unless you have a major change of heart from the sentiment in your op I don't think its a route worth going down on the one hand from a dilution of control and on the other possible avoidance investigation from HMRC.
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