Investment - Company or Personal


J

jghattersley

Hi,

I'm a novice at all this so please forgive me if I state the obvious
or ridiculous.

To cut a long story short, I've a small software company, we've made a
modest profit this year. I'd like to invest in a small manufacturing
company. My question is:

1) Is there a way of having my company own this investment?
2) Or would I be better off taking the money form my company as
dividends and taking on the investment personally?
3) Are there any resources out there that might help me understand the
details of this? Without Posting idiot questions. :)

I hope that makes sense.

Thanks in advance.

Cheers,
John

PS - if this is the wrong news group, I'm very sorry.
 
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P

Peter Saxton

Hi,

I'm a novice at all this so please forgive me if I state the obvious
or ridiculous.

To cut a long story short, I've a small software company, we've made a
modest profit this year. I'd like to invest in a small manufacturing
company. My question is:

1) Is there a way of having my company own this investment?
2) Or would I be better off taking the money form my company as
dividends and taking on the investment personally?
3) Are there any resources out there that might help me understand the
details of this? Without Posting idiot questions. :)

I hope that makes sense.

Thanks in advance.

Cheers,
John

PS - if this is the wrong news group, I'm very sorry.
Why are you considering having the software company investing in the
manufacturing company?
 
R

Ronald Raygun

Peter said:
Why are you considering having the software company investing in the
manufacturing company?
Why should he not? Don't think of the existing one as being a software
company per se, but as "jghattersley Ltd" which just happens at the
moment to be concentrating on software but is thinking about diversifying.

Depending on how much money is involved, taking money out may
involve him paying tax, which directly investing would not.

If no (or a not unreasonable amount of) tax is involved, I would
suggest the dividend route is preferable to the "holding company"
route, because of the KISS principle.
 
P

Peter Saxton

Why should he not? Don't think of the existing one as being a software
company per se, but as "jghattersley Ltd" which just happens at the
moment to be concentrating on software but is thinking about diversifying.

Depending on how much money is involved, taking money out may
involve him paying tax, which directly investing would not.

If no (or a not unreasonable amount of) tax is involved, I would
suggest the dividend route is preferable to the "holding company"
route, because of the KISS principle.
I think my question was reasonable but, unfortunately, it has not been
answered.
 
J

jghattersley

I think my question was reasonable but, unfortunately, it has not been
answered.
Thanks for your response guys. Sorry Peter I did respond but failed
to submit...so much for my IT skills!

Anyway, basically it's nearing my end of year and there's money left
in the company account, so I'm just considering the options.

An opportunity has come up where there's a small manufacturing company
I'd like to invest in, mainly for personal reasons but I'd also like
to diversify the company if applicable. So I was just checking if
there are any financial advantages/disadvantages from using my company
as a 'holding' company or taking the investment personally. The
amount of money I'm considering is < £20k, so not considerable but as
this is something I might like to do more of, thought I'd do a bit of
smurfing.

Thanks for your responses. Any tips much appreciated...

Cheers,
John
 
P

Peter Saxton

Thanks for your response guys. Sorry Peter I did respond but failed
to submit...so much for my IT skills!

Anyway, basically it's nearing my end of year and there's money left
in the company account, so I'm just considering the options.

An opportunity has come up where there's a small manufacturing company
I'd like to invest in, mainly for personal reasons but I'd also like
to diversify the company if applicable. So I was just checking if
there are any financial advantages/disadvantages from using my company
as a 'holding' company or taking the investment personally. The
amount of money I'm considering is < £20k, so not considerable but as
this is something I might like to do more of, thought I'd do a bit of
smurfing.

Thanks for your responses. Any tips much appreciated...

Cheers,
John
John

It really depends on whether there is an advantage in not declaring a
dividend. If there's no tax to pay if you declare a dividend then you
can declare the dividend and pursonally buy the shares. It's usually
best to declare a dividend and get the money out of the company (even
if it is just crediting your directors loan account) if there is no
tax to pay. In this case you could pay the dividend to yourself and
then buy the shares personally.
 
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J

Jon Griffey

Thanks for your response guys. Sorry Peter I did respond but failed
to submit...so much for my IT skills!

Anyway, basically it's nearing my end of year and there's money left
in the company account, so I'm just considering the options.

An opportunity has come up where there's a small manufacturing company
I'd like to invest in, mainly for personal reasons but I'd also like
to diversify the company if applicable. So I was just checking if
there are any financial advantages/disadvantages from using my company
as a 'holding' company or taking the investment personally. The
amount of money I'm considering is < £20k, so not considerable but as
this is something I might like to do more of, thought I'd do a bit of
smurfing.

Thanks for your responses. Any tips much appreciated...

I agree with Ronald Raygun. I am a firm believer that the KISS
principle should be observed wherever possible.

Although a holding company sounds tempting you need to consider (amongst
countless other things) (i) what happens if you want to sell the
software company but not the investment it holds - you will then need to
unravel it. (ii) what if software company goes bust - it will take the
investment with it (iii) would the holding of this investment cause the
loss of BATR? (iv) you have not said what stake you will be getting in
this manufacturing company - it might not be sufficient to qualify for
substantial shareholdings exemption (v) it will cause
accounting/disclosure issues in software company accounts. (vi) etc

--
Jon Griffey FCCA CTA
Hackett Griffey
Chartered Certified Accountants & Registered Auditors
2 Mill Road, Haverhill, Suffolk, CB9 8BD

Tel (01440) 762024

www.hackettgriffey.com

See website for disclaimers
 

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