Plan B........

[b0redom]

Hi,
I've been approached about a potential plan B. I work through my own Ltd, and the other person involved is a sole trader. The startup costs of this business would be relatively modest.

Is there any reason why I would/wouldn't want to fund Plan B via personal funds rather that MyCo owning a share in PlanBCo?

The only advantage I can see to MyCo owning shares rather than me is if I want to inject a large sum of cash, plus I guess maybe a bit of IR35 protection.

The main advantage of personal ownership as far as I can see is if I want to fold/sell PlanBCo, it doesn't effect my Ltd.

Can some of the other PlanBers give me any helpful insight?

Regards...

b0redom

[Ignis Fatuus]

Hi,
I've been approached about a potential plan B. I work through my own Ltd, and the other person involved is a sole trader. The startup costs of this business would be relatively modest.

Is there any reason why I would/wouldn't want to fund Plan B via personal funds rather that MyCo owning a share in PlanBCo?

The only advantage I can see to MyCo owning shares rather than me is if I want to inject a large sum of cash, plus I guess maybe a bit of IR35 protection.

The main advantage of personal ownership as far as I can see is if I want to fold/sell PlanBCo, it doesn't effect my Ltd.

Can some of the other PlanBers give me any helpful insight?

Regards...

b0redom

Yes. To "effect" is to bring about. To "affect" is to have an effect on.

HTH

[TheFaQQer]

Is there any reason why I would/wouldn't want to fund Plan B via personal funds rather that MyCo owning a share in PlanBCo?

If you have separate companies, then you would need to keep a little bit closer eye on what divi's you are paying - particularly if Plan B is with anyone else (which if you've been approached, it would be). If you own a 50:50 stake in B, and the other party wants to pay a £30k dividend, then you have to take that as well, so need to watch what you take from the other co without paying more tax. You could get round that by having multiple share classifications though (equal stake ion class A voting shares, you have a class B, partner has a class C and you then pay dividends at different rates according to the share class).

The only advantage I can see to MyCo owning shares rather than me is if I want to inject a large sum of cash, plus I guess maybe a bit of IR35 protection.

It's not going to have any impact on IR35, since that's assessed on a contract-by-contract basis.

The main advantage of personal ownership as far as I can see is if I want to fold/sell PlanBCo, it doesn't effect my Ltd.

That's how I see it.

[b0redom]

So you'd suggest owning it personally, and if necessary leaving funds in MyCo and drawing from PlanBco in order to minimise tax payments?

[TheFaQQer]

So you'd suggest owning it personally, and if necessary leaving funds in MyCo and drawing from PlanBco in order to minimise tax payments?

I'd own it personally.

Assuming that you are sole owner of both, then it's purely down to you where you draw the funds from. If you are in business with anyone else, then you can draw from B as he/she/it agrees and top up anything else from MyCo.

--

As a complete about face(!) - if Plan B is likely to be loss making in the short-term, then you may be better off under one roof so that the losses of one can be offset against the profits of another and reduce corporation tax (IANAA!).

-> If you are 100% owner of both, and B is likely to make a loss that you want to subsidise (on the understanding that it will turn a profit eventually), then have MyCo branch out and do B as well (no need for two companies and two sets of accounts etc.).

-> If you are 100% owner of both, and B is likely to make a loss but not have too many liabilities when you come to kill it off, own it through MyCo so that you can write the losses off short-term but not incur too big a penalty if you need to shut down.

-> If you are 100% owner of both, and B is likely to make a loss and may incur debts that you want to not honour when you come to shut it down, own it yourself and shut down if you need to.

-> If you aren't 100% owner of B, then own it personally and not through your company.

That's what I'd do, but I am no an accountant.

[b0redom]

Thanks for that very complete answer. I'd own 50% of PlanBCo, so sounds like it's sensible to own it personally, then I don't link MyCo to anyone else (however tenuously).

Thanks!

b0redom

[ChimpMaster]

If you are a shareholder in both companies then be aware of the "Associated Companies" rule.