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Using YourCo to invest in another business.

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    Using YourCo to invest in another business.

    Will be asking the accountant in due course, in the mean time does anyone have any experience of using YourCo. to invest in another business? Had an opportunity arise to buy into a local business via shares, that ties in with my longer term exit strategy from contacting.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

    #2
    Originally posted by DaveB View Post
    Will be asking the accountant in due course, in the mean time does anyone have any experience of using YourCo. to invest in another business? Had an opportunity arise to buy into a local business via shares, that ties in with my longer term exit strategy from contacting.
    yes.
    What do you want to know?
    See You Next Tuesday

    Comment


      #3
      The important thing here to ask your accountant (or any experts here) would the other business of yours necessarily be another Ltd ? Or can it be a business that is not officially a Ltd? e.g. Sole trader etc?

      Comment


        #4
        Originally posted by DaveB View Post
        Will be asking the accountant in due course, in the mean time does anyone have any experience of using YourCo. to invest in another business? Had an opportunity arise to buy into a local business via shares, that ties in with my longer term exit strategy from contacting.
        Not something I've done, but I guess it depends on your motivation (what is it?). If your motivation is to invest in a way that minimizes cost or maximizes relief, then it may be better to invest as an individual (e.g., there are venture capital reliefs). If the motivation is for YourCo to become an investment business and collect profits in your business from its investments in other businesses, then that is a different motivation. Be aware that being classified as an investment business has implications for all sorts of other things.

        Comment


          #5
          Originally posted by Lance View Post
          yes.
          What do you want to know?
          A general view on how easy / complicated it was and how it affected YourCo or not. Would you have done it via personal cash instead or did it work out ok?

          I'm not looking to turn MyCo. into an investment vehicle, but it's an opportunity to get into a business that could provide a long term income stream away from contracting.
          "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

          Comment


            #6
            Originally posted by DaveB View Post
            I'm not looking to turn MyCo. into an investment vehicle
            In that case, you'll need to apprise yourself of the rules that define a CIHC, since you want to avoid it (I would too), especially as you wind down your contracting activities (seems to be the implication).

            Comment


              #7
              Originally posted by DaveB View Post
              A general view on how easy / complicated it was and how it affected YourCo or not. Would you have done it via personal cash instead or did it work out ok?

              I'm not looking to turn MyCo. into an investment vehicle, but it's an opportunity to get into a business that could provide a long term income stream away from contracting.
              It was very easy. A LTD company is a legal entity which can purchase shares in another.
              At the time it made sense as the company being bought was in a similar marketplace so we just made a group of companies.

              I wouldn't have invested my own money as the one we bought was a car crash. You can write off those losses against CT.

              The question I'd be asking myself is where do I see it in 5 years?
              Let's say yourCo buys the shares, it works out really well and you stop contracting. You might want to close yourCO at that point but you can't as it owns part of the other company. You could buy the shares but that could get expensive. So only do it if you think the parent company will be around at least as long as the child company.
              See You Next Tuesday

              Comment


                #8
                Originally posted by Lance View Post
                It was very easy. A LTD company is a legal entity which can purchase shares in another.
                At the time it made sense as the company being bought was in a similar marketplace so we just made a group of companies.

                I wouldn't have invested my own money as the one we bought was a car crash. You can write off those losses against CT.

                The question I'd be asking myself is where do I see it in 5 years?
                Let's say yourCo buys the shares, it works out really well and you stop contracting. You might want to close yourCO at that point but you can't as it owns part of the other company. You could buy the shares but that could get expensive. So only do it if you think the parent company will be around at least as long as the child company.
                Cheers. Current MyCo. is not going anywhere as if this works out it will morph from a contracting company to one doing business in the new area in partnership with the part owed one.
                "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

                Comment


                  #9
                  This kind of thing is a massively complex topic, probably why most of the contractor specialist accountants on this forum are steering clear. As is often the case, if the numbers involved are fairly piddly, getting proper advice may be too expensive to justify given the size of the investment. I've barely touched this kind of thing in a decade so don't treat the below as gospel, but...

                  If it's a significant investment (appreciate that's a relative term), realistically forget your current contractor accountant and approach a reasonably big firm near you, that will have the varied specialisms required. You'll also maybe want to dive into the detail of whether what you're buying is the shares, or the trade and assets from the company (leaving the original owner still owning the shares, hence the company...but it being just an empty shell). This in itself is a whole extra huge topic.

                  If it's fairly small fry and hence you're not prepared to pay £'000s for advice, and you'd be buying shares, then my view would be:
                  - make the investment personally rather than via your company.
                  - have no transactions directly between the companies...ie if needs be, you personally take money from one company, to put into the other.
                  - for the time being at least, only take salary/dividends from the contracting company. If/when the new investment is doing well, fine, take a dividend from that too, but in infrequent large lump sums to make it easy to keep tabs on for personal tax.
                  - This will keep things simple. No group structure.

                  I realise this goes against Lance's comments, I'm not saying he's wrong, there's pros and cons, just saying the above is likely what I'd do. The above wouldn't give any scope for losses from one company to be offset against profits from another. However, personally I think more often than not it's the way to go. Indeed it's also what I have done, when setting up MVL Online Ltd, Maslins doesn't own any of the shares in it, and had my possible umbrella JV have become a thing, I'd have followed the same route for that.

                  Comment


                    #10
                    Originally posted by Maslins View Post
                    This kind of thing is a massively complex topic, probably why most of the contractor specialist accountants on this forum are steering clear. As is often the case, if the numbers involved are fairly piddly, getting proper advice may be too expensive to justify given the size of the investment. I've barely touched this kind of thing in a decade so don't treat the below as gospel, but...

                    If it's a significant investment (appreciate that's a relative term), realistically forget your current contractor accountant and approach a reasonably big firm near you, that will have the varied specialisms required. You'll also maybe want to dive into the detail of whether what you're buying is the shares, or the trade and assets from the company (leaving the original owner still owning the shares, hence the company...but it being just an empty shell). This in itself is a whole extra huge topic.

                    If it's fairly small fry and hence you're not prepared to pay £'000s for advice, and you'd be buying shares, then my view would be:
                    - make the investment personally rather than via your company.
                    - have no transactions directly between the companies...ie if needs be, you personally take money from one company, to put into the other.
                    - for the time being at least, only take salary/dividends from the contracting company. If/when the new investment is doing well, fine, take a dividend from that too, but in infrequent large lump sums to make it easy to keep tabs on for personal tax.
                    - This will keep things simple. No group structure.

                    I realise this goes against Lance's comments, I'm not saying he's wrong, there's pros and cons, just saying the above is likely what I'd do. The above wouldn't give any scope for losses from one company to be offset against profits from another. However, personally I think more often than not it's the way to go. Indeed it's also what I have done, when setting up MVL Online Ltd, Maslins doesn't own any of the shares in it, and had my possible umbrella JV have become a thing, I'd have followed the same route for that.
                    Cheers, that all makes sense as well. It is shares and it is a relatively small sum <£50k for a 10% stake in the business.

                    We've already taken dividends up to the tax threshold this year and personal funds are somewhat constrained by being in the process of buying a house as well. I'll ask the accountant about making a formal loan from MyCo. to myself over a reasonable period rather than a directors loan.
                    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

                    Comment

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