Company Ownership Structure

alexlyons

Had a chat with a friend about potential ways to structure the ownership of a business for tax efficiency. We were just throwing some ideas around and I thought I'd get an opinion or two. Nobody is saying this is the best way to do things, just a chat. Ignore all the assumptions of having to be successful and find a buyer etc.

Scene is you are starting a business and are open to the idea in years to come of selling it, however you want to minimise the tax liability if a sale happens.

You set yourself a get out target of a sale price of €10m total (after costs).

In order to minimise the tax liability you hold 10% of the shares personally and thus when sold (with the correct parameters) you are paid €1m and are taxed at 10%.

The balance of the shares are held by another company of which you are the 100% sole shareholder. €9m is paid to that company gross on the sale of the subsidiary.

The gross €9m can now be used for investments etc but not personal spending naturally. If you wanted to release funds for personal use this would be in the form of income and taxed appropriately, which is a lot higher than the 33% you would have paid had you owned all shares personally.

The benefit is only there if you can use the €9m for investments and grow it, or if you get enjoyment out of the business activities of that business and are no longer in it for the money.

Thoughts?

Mick Tator

Depending on the sector and time from launch, eventually about 90% of start-ups fail. Almost all of them have one feature in common - an owner/manager that is concentrating on ‘tax efficiency’ and a future sale for millions.

antoinolachtnai

The tax planning concept described above is not well conceived. I would advise getting advice from a tax professional.