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Limited company formation for husband and wife

Best director / shareholder structure for new limited company formation for husband and wife

Hello

We've just had an offer accepted to purchase the assets of an unincorporated hair salon. We've instructed a solicitor and accountant but I wanted to sense check before registering the company and I'd welcome any and all advice!?!

We've decided to setup a new limited company both for personal protection and tax purposes. I'm a higher rate tax payer (£50k) and my wife is lower rate but due to finish work in September (she's preggers with our second :-)

We'll be doing roughly 50/50 work in terms of marketing, bookkeeping etc. as there's a salon manager in situ. I don't plan on drawing income from the business as we've no need. We're hopeful of achieving a net profit of circa £15-20k per annum.

I'm assuming the best structure would be two have both of us as directors for day-to-day practical purposes (banking, buying stock, expenses etc.) with my wife 100% shareholder so we can pay her a salary and dividends into her account.

Does this sound reasonable?

Thanks in advance for your thoughts

Replies

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By Ruddles
22nd Feb 2018 20:27

That is exactly the kind of advice that you should expect from your own accountant.

All I would say is - it’s not all about tax.

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By mg200
22nd Feb 2018 21:23

It doesn't sound unreasonable.

I would divide the share capital into A and B shares and whilst there are tax free dividends available you could have some and still own half the company.

But I've made assumptions about your scenario and your accountant will be better placed to advise.

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By Matrix
to mg200
22nd Feb 2018 22:08

Any tax saved on dividends should be compared to the potential loss of child benefit.

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By Ruddles
to Matrix
22nd Feb 2018 22:53

Did you read the OP's post properly?

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By Matrix
to Ruddles
23rd Feb 2018 07:13

What is your point? The OP says they would not take an income but the above poster suggested taking a dividend to use the dividend allowance. I was advising against this since this would bring the OP's income over £50k and the loss of child benefit for 2 kids could be higher than the tax saved so what do you think I have missed? The OP has probably got it right in not taking any money.

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to Matrix
23rd Feb 2018 07:42

Depends how accurate that £50k is. An extra £2k in the taper zone probably won't make a lot of difference.

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By Matrix
to lionofludesch
23rd Feb 2018 07:55

He has said £50k so if you assume that any dividends would fall within the £50k to £60k range then he would have to pay back child benefit of £350 but (as a couple) only save tax of £150.

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By Ruddles
to Matrix
23rd Feb 2018 08:26

You haven't missed anything. I missed the fact (didn't read your post properly) that you were responding to another poster and not to the OP.

Nobody is perfect :¬)

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to Ruddles
23rd Feb 2018 08:45

Ruddles wrote:

Nobody is perfect :¬)

Quick, someone screenshot that for save keeping!

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22nd Feb 2018 22:43

It doesn't sound unreasonable, but as someone else said. You should speak to your accountant about it.

Structuring a business in the correct form can be a 5-10 minute conversation if your accountant knows your affairs well already, yet if you get it wrong it will cost you thousands.

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23rd Feb 2018 15:38

Hi Everyone

Thanks so much for your replies, really useful and lots of food for thought. We'd never even considered the impact on Child Benefit!

I am meeting our accountant in a week (he's on a cruise... yes he's a walking stereotype!) I'm just keen to get started :-)

It feels like my original proposal to have two directors with my wife 100% shareholder still makes the most sense for us. However just to clarify if we were to split our share capital into A and B shares is the idea to allow us to declare different rates of dividend per share class? Would we still need to split ownership say 90%/10%?

I think we're keen to keep things simple and stay away from alphabet shares, dividend waivers etc.

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