Loan to another limited co

[kamikz]

Hi, just looking for some advice on the following:

I have my own ltd co for my contracting, it has some cash in the bank and a reasonable profit of which I haven't taken all of as trying not to dip too much into the 40% tax.

I am now in the process of starting up a new company on a 50-50 share with my brother, this new company is a completely different business and requires some funding to start up.

Now, I'd like to be able to loan or invest in the company using my existing co so that I don't have to pay extra tax by withdrawing the funds personally and then investing them as I'd then be hit by the 40% tax. Is there a way to do this? Can I do this in a way to reduce corp tax on my contracting co?

Thanks

[malvolio]

Hi, just looking for some advice on the following:

I have my own ltd co for my contracting, it has some cash in the bank and a reasonable profit of which I haven't taken all of as trying not to dip too much into the 40% tax.

I am now in the process of starting up a new company on a 50-50 share with my brother, this new company is a completely different business and requires some funding to start up.

Now, I'd like to be able to loan or invest in the company using my existing co so that I don't have to pay extra tax by withdrawing the funds personally and then investing them as I'd then be hit by the 40% tax. Is there a way to do this? Can I do this in a way to reduce corp tax on my contracting co?

Thanks

Ever heard of Shares? Intresting idea...

HTH




Seriously though, there's nothing to stop YourCo being a 50% shareholder, instead of you. Just be very sure you've agreed where the money goest to and who gets paid what. this is a business arrangement, not a personal one, even if you use your own money.

[kamikz]

So can we issue a 50-50 split of shares with myco and my brother even though it will only be myco investing money, the reason I didn't go down this route was because I thought he would have to invest an equal sum of money to have the same share holding.

[Clare@InTouch]

So can we issue a 50-50 split of shares with myco and my brother even though it will only be myco investing money, the reason I didn't go down this route was because I thought he would have to invest an equal sum of money to have the same share holding.

Shares need not be linked to investment. Issue the shares at par (face value of £1 each) and then your company can just make a loan to the new company.

[kamikz]

Shares need not be linked to investment. Issue the shares at par (face value of £1 each) and then your company can just make a loan to the new company.

Thanks

[Wary]

Hi, just looking for some advice on the following:

I have my own ltd co for my contracting, it has some cash in the bank and a reasonable profit of which I haven't taken all of as trying not to dip too much into the 40% tax.

I am now in the process of starting up a new company on a 50-50 share with my brother, this new company is a completely different business and requires some funding to start up.

Now, I'd like to be able to loan or invest in the company using my existing co so that I don't have to pay extra tax by withdrawing the funds personally and then investing them as I'd then be hit by the 40% tax. Is there a way to do this? Can I do this in a way to reduce corp tax on my contracting co?

Thanks

Have you considered closing your old company using the ESC C16 concession? It sounds like you'd be eligible to qualify for entrepreneur's relief. Rar more efficient than paying 40% on dividends.

[prozak]

Hi, just looking for some advice on the following:

I have my own ltd co for my contracting, it has some cash in the bank and a reasonable profit of which I haven't taken all of as trying not to dip too much into the 40% tax.

I am now in the process of starting up a new company on a 50-50 share with my brother, this new company is a completely different business and requires some funding to start up.

Now, I'd like to be able to loan or invest in the company using my existing co so that I don't have to pay extra tax by withdrawing the funds personally and then investing them as I'd then be hit by the 40% tax. Is there a way to do this? Can I do this in a way to reduce corp tax on my contracting co?

Thanks

You need to consider what the plan is with the money you are "investing"

Do you want to invest it as capital? - removable only with capital distributions and adding to the value of the business but not guaranteed to get it back? WHo is the director? What if they decide not to pay dividends ever?

Or do you want to loan it to the company for purely cash flow reasons but want the whole sum back as soon as possible - and putting yourself ahead of shareholders in getting money out if it all goes pear shaped? No guarantee of getting it back either but you are at least ahead of shareholders.

[tractor]

..

You need to consider what the plan is with the money you are "investing"

Do you want to invest it as capital? - removable only with capital distributions and adding to the value of the business but not guaranteed to get it back? WHo is the director? What if they decide not to pay dividends ever?

Or do you want to loan it to the company for purely cash flow reasons but want the whole sum back as soon as possible - and putting yourself ahead of shareholders in getting money out if it all goes pear shaped? No guarantee of getting it back either but you are at least ahead of shareholders.

You also need to consider the controlling interest and an exit strategy if/when it all goes pear shaped. So many people ignore that aspect but family and money/business often don't mix well and the best of all intentions often change. You really do need to be prepared both for your sake and your brother.

[Wanderer]

You also need to consider the controlling interest and an exit strategy if/when it all goes pear shaped. So many people ignore that aspect but family and money/business often don't mix well and the best of all intentions often change. You really do need to be prepared both for your sake and your brother.

What he said! Tread very carefully here. What if your personal circumstances change and you need the money back? Who's going to run the new company? Who will be the directors/shareholders? What if you decide to pull out?

Get some professional advice on the share structure and how you are going to fund the company (by a loan or shares?) and make sure you are not going to mess yourself up.