Buying a stake in another company

[Pickle2]

To answer my own question for completeness: I have been looking around and the answer is that, yes, there are some nasty taxation gottchas to look out for. All to do with how associated companies are treated as a whole for the purposes of corp tax, basically meaning the holding in the 2nd company could push my contractor earnings into the large companies tax band. grrr.

http://www.taxation.co.uk/Articles/2...d+problems.htm

[Pickle2]

An accountancy question.

I have been presented with the opportunity of investing in a friends startup. Regardless of the merits of the investment oportunity, Im intrested to know what my options would be to fund my stake.

I have lots of cash sitting in my ltd.


Option 1 is to pay the cash to myself as a divvi, and buy the shares of the 2nd company with that. Obviously I will have to give the tax man a big chunk of the divi.

Option 2. Can my ltd buy the stake in the 2nd company? What would be the implications of this? My ltd would then be a shareholder of the startup I suppose. Are there any nasty tax implications? I wouldnt expect the startup to be paying dividends any time soon, but eventually. What would happen if I chose to close my own company down.

I know, I know, I should probably speak to someone proffesional, but you guys are sooo good at this stuff.