I am investing in a startup where we have an existing founder,who was the sole director and shareholder, and now will have another shareholder (minority shareholder, me)
We have agreed that the founder will still run the business mainly and will devote full time into teh business and wants to take out some form of funds to fund his living to the tune of £50,000
He can draw a salary of £50,000 however, dividend is more tax efficient from NI etc point of view. However, dividends would mean that a part of the dividend need to be distributed to me as well (as will own around 20%) which is not what we want.
Apart from ordinary shares (80% to him, 20% to me) is it possible to issue him non-voting preference shares such that dividend to the tune of £50,000 are paid to him? This will ensure only he gets this distribution, and it is capped at £50,000 if profits are made that is, and helps lower the tax burden from the distribution (vs if he took as salary). Are dividends on preference shares taxed in same way as ordinary shares?