Company Structure/Shares
Discussion
Hi All,
I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
assuming you do this before company b starts trading then the shares are arguably worth zero.
In an insolvency the shares of company b would be a company asset like anything else and they would be sold to try and generate funds for creditors.
Dividends paid by B to A would not be taxable in A.
im not sure why you dont just set up company b separately to be honest - what advantage is this structure giving you?
In an insolvency the shares of company b would be a company asset like anything else and they would be sold to try and generate funds for creditors.
Dividends paid by B to A would not be taxable in A.
im not sure why you dont just set up company b separately to be honest - what advantage is this structure giving you?
Hi, thanks for the reply.
Two reasons really. It would give company B working capital and the ability to cover upfront operating costs. Company A has also developed a growing cash surplus, and redistributing some of this makes a lot sense from a risk perspective.
Company B has nailed on Clients so Company A would buy the shares knowing there will be future dividends.
Cheers, WH
Two reasons really. It would give company B working capital and the ability to cover upfront operating costs. Company A has also developed a growing cash surplus, and redistributing some of this makes a lot sense from a risk perspective.
Company B has nailed on Clients so Company A would buy the shares knowing there will be future dividends.
Cheers, WH
Edited by WinkleHoff on Monday 25th August 06:58
You can loan money between the companies for working capital, isn't that the easiest way? Pay it back (with interest) when you can.
That's how all of my companies have started without taking on any formal debt.
To add: You can also invoice the second company a 'management fee' for time/resources.
That's how all of my companies have started without taking on any formal debt.
To add: You can also invoice the second company a 'management fee' for time/resources.
AB said:
You can loan money between the companies for working capital, isn't that the easiest way? Pay it back (with interest) when you can.
That's how all of my companies have started without taking on any formal debt.
To add: You can also invoice the second company a 'management fee' for time/resources.
Thanks for that, its an interesting point. Yes that's possible. If company A (the lender to Company B) goes insolvent, presumably the debt owed by Company B shows on the balance sheet of company A and the liquidator would seek recovery of the debt, or would it be written off?That's how all of my companies have started without taking on any formal debt.
To add: You can also invoice the second company a 'management fee' for time/resources.
The reason I was thinking about 20% non controlling interest for company A was to avoid the incurrence of a debt owed from B to A. The dividends paid from B to A would go toward my SIPP etc.
Thanks, WH
AB said:
It wouldn't be debt if it was a management fee that had been paid over. A loan would.
Not sure how it would look if the company went bump because of the management fee though
Probably not great I suspect and I wonder if they would challenge that, particularly if the price for the services was out of kilter! LOL...Not sure how it would look if the company went bump because of the management fee though
WinkleHoff said:
Really? Even if non controlling interest and not a parent company? I'd get it if it was a true holding company....
Yep. I wasn't privy to the detail but as I recall, the liquidators leaned into to the fact that both companies shared a common owner despite this being the only connection between the two. They didn't force the liquidation of the company per-se but we were not in a position to settle so were forced to liquidate it. StevieBee said:
WinkleHoff said:
Really? Even if non controlling interest and not a parent company? I'd get it if it was a true holding company....
Yep. I wasn't privy to the detail but as I recall, the liquidators leaned into to the fact that both companies shared a common owner despite this being the only connection between the two. They didn't force the liquidation of the company per-se but we were not in a position to settle so were forced to liquidate it. WinkleHoff said:
Hi All,
I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
If the ownership structure for both companies is the same, what is the perceived benefit in setting up a second company?I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
Do you have employees that would not be common across both?
Two companies means two sets of fees etc.
MustangGT said:
WinkleHoff said:
Hi All,
I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
If the ownership structure for both companies is the same, what is the perceived benefit in setting up a second company?I run a consulting business (lets call it company A). I am setting up another separate consulting business to undertake commissions that have a different risk profile and sector (Company B). I'd like company B to sell some shares to Company A, say 20%. Company B will pay dividends to company A based on the shareholding. Company A will purchase the shares from Company B. Company A will not have a controlling interest In company B, it is purely investing in Company B. My wife and I are shareholders of company A, and also company B. I am not intending company A to become a holding company of B in any way.
My considerations are;
1: How do I value the shares that B will sell to A?
2: As a theoretical scenario, what would happen if A ever went insolvent? I assume the 20% non controling investment will show up on the balance sheet and liquidators would be able to sell these shares or seek to do a deal with Company B for the value of the shares. Or could they ever seek to try and wind up company B to pay company A debts, in such an eventuality?
I'd welcome.any insight on this.
Many thanks.
Do you have employees that would not be common across both?
Two companies means two sets of fees etc.
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