How to best structure finances when investing and working for a company

Log in to reply
M

Mr_VL

Free Member
Aug 29, 2018
2
0
  • #1
    I am leaving my safe big company career to buy a stake in a company and also take up a full time role in the company

    I am trying to figure out how to best structure my investment vs remuneration - would welcome thoughts...

    I am investing £200k - the role I take will deliver remuneration of £100k per year. The company will seek a further £500k of investment from Angels or potentially VC

    I will be the first investor in this campaign, so the cash is required to kick off the growth plan

    Based on this, is it better to;

    1. Invest for equity and reward through salary (so my taxed earnings go in and I am paid salary on which I am taxed)
    2. Invest for debt and reward through equity (so my money is repaid each month and I am awarded equity for my time)

    I would welcome opinion on this or insight into other ways of structuring

    Thanks in advance
    VL
     
    Scalloway

    Scalloway

    Free Member
    Jun 6, 2010
    18,422
    12
    4,194
    Shetland Islands
  • #2
    Have you done your due diligence on the company that you are investing in? Are you sure it has the capability to earn the sums you expect? Have you engaged a solicitor to look at the agreement the company is offering?

    Putting some of money as a loan gives you a safety net as you are more likely to get money back.
     
    Upvote 0
    M

    Mr D

    Free Member
    Feb 12, 2017
    28,915
    3,627
    Stirling
  • #3
    Have your own solicitor look at any agreement. Or draft one to protect your money.
    Are you buying shares, giving a loan, becoming a director? All 3?
    Will there be an exit strategy to recover your investment?
    If having shares you need a shareholder agreement, The forums are lousy with businesses where shareholders have ended up disagreeing in time and there have been problems.
     
    Upvote 0
    M

    Mr_VL

    Free Member
    Aug 29, 2018
    2
    0
  • #4
    Thanks...

    Yes - Due dilligence has been ongoing for 3 months and I have known it and it’s current owners for 7 years

    Shareholder agreements and exit strategies are also drafted and look acceptable

    I will be a director and shareholder

    My question is how I balance investment vs earnings efficiently from a tax perspective - so do I make a loan, get paid in equity along with regular repayments of the loan or just earn a salary?
     
    Upvote 0
    F

    FD Capital

  • #5
    In the long run the selling your shares and claiming entrepreneurs relief is the most efficient way to get your investment return. But you also need to consider how to live meanwhile. Dividends are not subject to income tax and if you have a spouse you can divide your investment between the both of you reducing the amount you pay at higher rates of tax.
     
    Upvote 0
    Clinton

    Clinton

    Free Member
    • Business Listing
    Jan 17, 2010
    5,748
    1
    3,068
    ukbusinessbrokers.com
  • #6
    This is not the best place for advice on matters like these. Don't be tight - go pay for professional advice!

    As @FD Capital says, ER is a low tax option, but there are lots of rules surrounding eligibility. You need to have a certain percentage of the shares and you need to have held them for a certain period of time. Further, if there are alphabet shares in the company, and they have different rights, this could impact on eligibility (since the last budget).

    Shareholder agreements and exit strategies are also drafted and look acceptable
    Click to expand...
    To you? This is also a matter for professional advice.

    With respect structuring, I can already think of a couple of cool ideas on how you can do this, which may not seem obvious at first, but I'm not going to share them in a public forum.

    Start by speaking with your accountant and asking him if he can advise or if he can put you in touch with someone else who can advise. (No, not me, don't DM me!)
     
    Upvote 0
    Log in to reply

    Latest Articles

    Top Bottom
    Community
    Articles
    Menu