Adding Share Class to a Limited Company

[fabhead]

Hi There, I have been running a limited co for three years with myself as sole director and employee with 1 Ordinary Class share. My partner has now started contracting as well (non married, different surnames) and is contracting under the same limited company. I want to include them as and employee and a shareholder so that they can also take a salary and dividends. The idea (from my accountant) seems to be that his shares would be a different class to the ones currently in issue (my 1 ordinary) so that we could take different levels of dividends based on our individual requirements. I am just submitting my Companies House Annual Web Filing, and it seems to offer me the chance to add share classes. So my questions are:

Would this be a good way to do the company restructure (rather than paying my accountant the £250 plus VAT he wants ....)?

Is there a better way or time to do this?

What 2 different classes of shares should I use?

Do I leave me as "Ordinary" and add them as one of the other options (Preference, Deferred Ordinary, Deferred, Redeemable, Redeemable Preference, A Ordinary, B Ordinary, C Ordinary) or do I need to change myself to some sort of superior class and put them as Ordinary (I wish to remain in overall control of the company and majority shareholder)? What about number of shares?

Any info or advice on how to structure the company gratefully received.

[FatLazyContractor]

I'd wait for BP's suggestions

[northernladuk]

Get her to set her own up and keep them separate IMO... Failing that why not ask your accountant?

[vetran]

Get her to set her own up and keep them separate IMO... Failing that why not ask your accountant?

Makes the most sense. When he stops being your boyfriend then he will have no claim on your company. You get two bites at bankruptcy etc.

If she isn't your wife I'm not sure how tax works if you share the proceeds of your or his work at higher rate & lower rate tax. Could HMRC deem the higher rate earner the main tax payer and shaft them?

[TheFaQQer]

If she is buying a share in the business, what price is she paying for it?

If she isn't buying a share in the business, and you are giving it to her, you need to watch the settlements legislation carefully because you wouldn't want to end up with a whacking great tax bill because you did it wrong.

[mudskipper]

OP's partner is male if you read the post.

But I would echo the advice to separate your affairs unless you are very confident in the future of the relationship.

[vetran]

OP's partner is male if you read the post.

But I would echo the advice to separate your affairs unless you are very confident in the future of the relationship.

only means the majority of posters won't now ask for pics.

Good spot!

[fabhead]

are you sure you want pics?

he's not that pretty

So to clarify, we are, both contractors, similar rates (I'm higher, obv), no one is a housewife pretending to be a company secretary etc. The main aim of the exercise is not primarily to safeguard my company, although that is secondary. The primary aim is to maximise profits, minimise tax and expenses. Any salary/dividends from either party will be spent on our joint household/kids so there is no great reason to keep everything separate from my point of view - unless you tell me different. It just seemed to me to be more efficient given that we do same kind of thing, similar earnings, 50/50 finances etc. (and how crap he is at admin and paperwork).

I suppose I am giving him a share but he is also submitting monthly invoices into the company.

My accountant seemed to think this was ok but wants 250 plus VAT to set it up. It seems fairly easy to do myself.

So for 2 contractors, similar rates, live together, mirror wills, children, is there any benefit to having separate companies or any disadvantage to having 1? How should it be structured if we keep it as one?

What's settlements legislation?

[TheCyclingProgrammer]

I'm not convinced the settlements legislation is an issue here, I'm not even sure giving them a share for nothing would count as a settlement in this case as there's no element of bounty IMO - they aren't getting something for nothing, they are going to be fee earning and bringing in profit for the company. Add to that there is no tax avoidance motivation so I don't think it's something you need to worry about. You're really just taking on a business partner and that to me is a normal commercial transaction which the settlements legislation is not designed to catch.

That said I'm not convinced a messy share structure is the best way to go. A far simpler option would be to pay your partner a good salary for the work they do and look at it as an expansion of your business.

If you eventually get married then you could still give them ordinary share, make them a director and share the profits in your successful (hopefully) business together.

[SueEllen]

I'm not convinced the settlements legislation is an issue here, I'm not even sure giving them a share for nothing would count as a settlement in this case as there's no element of bounty IMO - they aren't getting something for nothing, they are going to be fee earning and bringing in profit for the company. Add to that there is no tax avoidance motivation so I don't think it's something you need to worry about. You're really just taking on a business partner and that to me is a normal commercial transaction which the settlements legislation is not designed to catch.

That said I'm not convinced a messy share structure is the best way to go. A far simpler option would be to pay your partner a good salary for the work they do and look at it as an expansion of your business.

If you eventually get married then you could still give them ordinary share, make them a director and share the profits in your successful (hopefully) business together.

Make them company secretary.