Once your business gets to a certain level of success and stability, it’s always a good idea to think about the future – the future of the company, but also the future of your family and how this will link in with the course of the business. Setting up a family company structure is one way to protect your personal and family interests, while planning for the wealth and tax implications.
Thinking about the future of your business and family
The initial start-up phase is the point at which you want to start thinking about the future and getting your goals pinned down early. Do you want your children involved in the business at a later date? Do you need flexibility built into the structure for future generations?
Further down the line, once there’s value in the company shares, putting this kind of family company structure in place becomes a lot more difficult. Start thinking about your intended goals alongside your structuring and planning, so you’re starting to set the right foundations.
The benefits of creating a new entity within the business
One option is to set up a trading company that’s owned by yourself and your partner, then have a new company over this in the business structure that has some shares in it.
Having a company that sits above the main trading entity means you can create a family investment company, if you want to. When you want to take cash out of the business for a specific purpose, you can do this. Any dividends you take out of the main business can then be paid into this separate company, giving you more options for how you then utilise this capital.
If you’re thinking about property or shares, you absolutely need this structure in place to keep things flexible and tax efficient. There’s a minimal admin fee to keep the second company running, but it delivers a real benefit in the longer term.
Planning ahead and flexing for the future
Younger people are likely to go for a simple set-up. Wealthier, older people, with more family interests, will go for a more complex set-up. Over time, things will inevitably get more complicated as your family grows and more interests have to be accounted for.
Shareholder agreements, gifting money and writing a will all serve to add to the complexity. And the needs of the business and family can change a lot over time. Because of this, your family company structure needs to be reviewed at least every five years. But as you get older, or your kids get closer to 18, you need to review things more frequently.
Intentions change, families change, relationships change. Your aim is to make the structure fit your current reality and to plan ahead with as much foresight as possible.
If you’d like to review your family company options, please do get in touch with us.
www.hwca.com/accountants-esher
T: 020 8549 5137
E: esher@hwca.com
