A legal way to raise my company capital (selling on high price)?

[pk70]

(This is a continuation for the first post I made (Is this legal way to avoid...)) ... if you read my first post you will see my situation. )

I need capital for my business (I am registered as a sole trader). It has to be my money/capital. I am thinking of getting capital from my friends/relatives. Then after I made profits from my business I would give these people their share of the profit.

Now, I have to find the way to transfer money legally. As a gift its not a very good idea because of 40% tax. But could I sell them something to get money to me and then buy something from them when its time to give profits to them back? Is this legal, and what is the law regarding to selling/buying and how big price can we put legally speaking? Any tax problems here? Thank you.

 

[Lease4Less]

(This is a continuation for the first post I made (Is this legal way to avoid...)) ... if you read my first post you will see my situation. )

I need capital for my business (I am registered as a sole trader). It has to be my money/capital. I am thinking of getting capital from my friends/relatives. Then after I made profits from my business I would give these people their share of the profit.

Now, I have to find the way to transfer money legally. As a gift its not a very good idea because of 40% tax. But could I sell them something to get money to me and then buy something from them when its time to give profits to them back? Is this legal, and what is the law regarding to selling/buying and how big price can we put legally speaking? Any tax problems here? Thank you.

Why don't you just loan it from your friends/relatives? Instead of trying to find ways to buck the system (that are probably illegal), loan the money and pay it back. Then it wouldn't be a gift but a business arrangement.

 

[akirk]

you sell them shares and then buy them back
http://www.hmrc.gov.uk/cgt/shares/calc-cgt.htm

there can be tax reliefs:
http://www.hmrc.gov.uk/cgt/shares/reliefs.htm

such as EIS:
http://www.hmrc.gov.uk/eis/part1/1-2.htm

I would suggest advice from an accountant

Alasdair

 

[pk70]

Why don't you just loan it from your friends/relatives? Instead of trying to find ways to buck the system (that are probably illegal), loan the money and pay it back. Then it wouldn't be a gift but a business arrangement.

Thanks very much. Strange that I did not even think about this option.

So how do I legally borrow money from friends? What paperwork is involved?

Yes, this would be a way to get money to me. But there is one problem here: how will I pay them the profit share that belongs to them after I make profits in business? Because when I pay back the loan, I cannot obviously give the profits in that.

 

[pk70]

you sell them shares and then buy them back
I would suggest advice from an accountant

Alasdair

Hmmm, selling shares... but that would mean that I am regarded as an investment company, and I would need to register with FSA isnt it? That would not really help ...

 

[Lease4Less]

Hmmm, selling shares... but that would mean that I am regarded as an investment company, and I would need to register with FSA isnt it? That would not really help ...

You can do this in 2 ways:

Treat the loan as exactly that and pay them back per week/month/year etc... or sell them shares.

You could them buy them out when the company is making a profit, or keep them on as shareholders.

You would not be classed as an investment company.

 

[akirk]

Hmmm, selling shares... but that would mean that I am regarded as an investment company, and I would need to register with FSA isnt it? That would not really help ...

not if selling shares in your own business - that is called investment

selling someone else's shares (e.g. shell / BT / IBM / etc.) might be a little more problematic - but is irrelevant anyway!

Alasdair

 

[Chris Ashdown]

They make a personel loan to you

You make a personel loan to the company

You then take the loan back over time and pay the lenders

You then pay them profit from your income

By then you have probably lost your frends but hell thats business

 

[pk70]

not if selling shares in your own business - that is called investment

selling someone else's shares (e.g. shell / BT / IBM / etc.) might be a little more problematic - but is irrelevant anyway!

Alasdair

Ok, thanks. This is a good idea to think about. I could sell the shares of my own company. I wonder if I get troubles with FSA if my own business is then related to investment? I mean if I invest my companys money. So the company is based on investment busieness and then I would share my companies shares. Does this cause problems (because I would do investments on capital)?

 

[akirk]

having an investor in your business is irrelevant in terms of the nature of your business - FSA does not regulate how you deal with investors into your business (generally - there would be some exceptions), it is no different to when you set up the business and sell yourself shares by paying in the share capital...

talk to an accountant.

Alasdair

 

[pk70]

Why don't you just loan it from your friends/relatives? Instead of trying to find ways to buck the system (that are probably illegal), loan the money and pay it back. Then it wouldn't be a gift but a business arrangement.

btw, do you know exatcly why is it illegal? So is it illegal to sell products for high price? What part exatcly is illegal?

 

[Lease4Less]

btw, do you know exatcly why is it illegal? So is it illegal to sell products for high price? What part exatcly is illegal?

Almost every post you have made is about trying to avoid paying tax, and in your earlier thread (the one relating to this one), you were on very dubious ground about transfering money.You really need to speak to an accountant, as you seen intent on avoiding paying any sort of money to the tax man, and I think you need some advice on what is allowed!

 

[pk70]

Almost every post you have made is about trying to avoid paying tax, and in your earlier thread (the one relating to this one), you were on very dubious ground about transfering money.You really need to speak to an accountant, as you seen intent on avoiding paying any sort of money to the tax man, and I think you need some advice on what is allowed!

No, its not about paying taxes (as long as its not some huge 40%-50% tax). Its about doing things legally. I am happpy to pay like 25% taxes on everything. Its about me been able to do my business at all!! because if I do not have capital, its a bit difficult to do my business, isnt it? Yes I could try to earn my own capital, but that would take years... and its another issue.

 

[pk70]

Almost every post you have made is about trying to avoid paying tax, and in your earlier thread (the one relating to this one), you were on very dubious ground about transfering money.You really need to speak to an accountant, as you seen intent on avoiding paying any sort of money to the tax man, and I think you need some advice on what is allowed!

Also, some laws are just not very good... simple as that. And when when that happens and its something very important for me (like whether i get income or not!) of course I am trying to go around this kind of laws. I am not against laws, but some laws just go too far and are not reasonable. The proglem is that lawmakers do not always consider all situations but make very general laws which obviously are not suitable for all cases.

Like me been able to do what I want to do i would need pay like £2000 to start legally. and it would take long time to do the paperwork. But what will I eat/how will I pay my bills until i get those 2 ? 2000 is very big money for me. I cannot even hire a lawer to help me. So I have to start by going around some laws if possible.

 

[Lease4Less]

I'm not even sure what you are getting at now.You want to start a business? You have friends/relatives that will lend you the money? You have your capital, all you need to do is pay them back when you make the money.http://www.ukbusinessforums.co.uk/forums/showthread.php?t=173616You have started the above thread. Where are you going with this? Who the hell will by a painting that is "rubbish" for 5K? Is this just another way of getting your capital without leaving a paper trail? Anyone who lends you money, whether they be friends or family are going to want it back at some point and will surely want either a contract drawing up, or have some equity in your business.

 

[Lease4Less]

Also, some laws are just not very good... simple as that. And when when that happens and its something very important for me (like whether i get income or not!) of course I am trying to go around this kind of laws. I am not against laws, but some laws just go too far and are not reasonable. The proglem is that lawmakers do not always consider all situations but make very general laws which obviously are not suitable for all cases.

Like me been able to do what I want to do i would need pay like £2000 to start legally. and it would take long time to do the paperwork. But what will I eat/how will I pay my bills until i get those 2 ? 2000 is very big money for me. I cannot even hire a lawer to help me. So I have to start by going around some laws if possible.

If you friends or family read the above they would probably have 2nd thoughts about lending you any money!

 

[pk70]

Almost every post you have made is about trying to avoid paying tax, and in your earlier thread (the one relating to this one), you were on very dubious ground about transfering money.You really need to speak to an accountant, as you seen intent on avoiding paying any sort of money to the tax man, and I think you need some advice on what is allowed!

If your income yearly was £8000, would you be totally happy to pay like £5000 for all kind of paper work and legal issues? Or would you like the idea to just start without this heavy legal work , if possible, and do it possible when you get more money?

 

[pk70]

If you friends or family read the above they would probably have 2nd thoughts about lending you any money!

Why? There is no business in the world which started small but ended up big?

 

[MikeJ]

So far, you've basically said you'll only obey the laws that you like and you'll pay the tax that you think is fair.

This may be a bit of a shock to you, but the rest of us don't have that choice. We do get to vote every now and then, and hope that the people we vote for introduce the laws we want. But we can't just pick and choose the laws that we like.

 

[pk70]

So far, you've basically said you'll only obey the laws that you like and you'll pay the tax that you think is fair.

This may be a bit of a shock to you, but the rest of us don't have that choice. We do get to vote every now and then, and hope that the people we vote for introduce the laws we want. But we can't just pick and choose the laws that we like.

Ok, so you have never made a copy of a song illegally and listened it on a CD player? Remember that even copying your own CD to a mp3 player is illegal . You done this?

 

[pk70]

So far, you've basically said you'll only obey the laws that you like and you'll pay the tax that you think is fair.

This may be a bit of a shock to you, but the rest of us don't have that choice. We do get to vote every now and then, and hope that the people we vote for introduce the laws we want. But we can't just pick and choose the laws that we like.

No, its not whether i "like"... but more that whether its reasonable. I dont like very much paying normal work tax, but its reasonable (at least when 25%).

Like, I dont think its reasonable that as a musician when we practise 10 different song and the leader gives me the CD to practise those songs, that I would have to run to music shop and purhase those 10 CD s to get those 10 songs (10 * £15 = £150 cost for me!!). Ye, i brake the law, but...

 

[akirk]

well, we were trying to help you with genuine answers...

but...

if what you want is to do only what you want there is little point in asking us - you have the freedom of choice in this country - you can obey the laws / break the laws as you wish - but you take the consequences...

if you want advice on how to minimise tax then an accountant will save you more money then they will cost...

if you want advice on how not to pay tax you legally obliged to pay, then sorry - can't help, that is illegal.

you seem to be saying that you have no money to start a business and therefore you are entitled to do whatever is necessary to get that money, even if it may not be legal...
sorry - no. if you have no money, then you borrow it from the bank / friends / earn it / etc. as everyone else does...
there is no entitlement to be able to start a business - sometimes it ie better to go and work a few years and earn the money and then start from a stronger place.

this is a very helpful forum where people will give lots of good advice - but not on how to break the law

regards

Alasdair

 

[pk70]

well, we were trying to help you with genuine answers...

but...

if what you want is to do only what you want there is little point in asking us - you have the freedom of choice in this country - you can obey the laws / break the laws as you wish - but you take the consequences...

if you want advice on how to minimise tax then an accountant will save you more money then they will cost...

if you want advice on how not to pay tax you legally obliged to pay, then sorry - can't help, that is illegal.

regards

Alasdair

No, I was asking *legal* ways to get the capital for my business. And then legally send back profits to them. There are many rules which tries to stop me doing this... this is it all about.

 

[akirk]

No, I was asking *legal* ways to get the capital for my business. And then legally send back profits to them. There are many rules which tries to stop me doing this... this is it all about.

but...

we gave you the answers and you didn't like them

my post after your first post points you at share sales / tax / EIS / etc. - cheap ways of investing in a business - there are plenty of legal ways of doing this without paying lots of tax, in fact through a business you can end up with lower tax than otherwise...

yet you seem to ignore these suggestions in favour of wacky ideas which really won't work in so many ways...

it is as though you don't want to put the effort in - go and talk to an accountant - discuss the pages I pointed at on the HMRC website - there are good options available.

but don't post as you did above that you are prepared to break the law...

Alasdair

 

[Billmccallum]

There are many rules which tries to stop me doing this... this is it all about.

There are no rules to STOP you doing this, its simply a case of getting the friends/relativels to lend you the money and IF you make a profit you pay it back.

If they want to share the profits, then its up to them to manage their income to make the most efficient use of the the tax system.

As already pointed out, speak to an accountant, its not rocket science, its just business, if you concentrate on how best to avoid tax it can only serve to reduce your credibility.

 

[pk70]

There are no rules to STOP you doing this, its simply a case of getting the friends/relativels to lend you the money and IF you make a profit you pay it back.

If they want to share the profits, then its up to them to manage their income to make the most efficient use of the the tax system.

As already pointed out, speak to an accountant, its not rocket science, its just business, if you concentrate on how best to avoid tax it can only serve to reduce your credibility.

Yes , they want a share of the profit. So if I borrow the money then its ok to share the profits?

If I borrow the money, can I legally speaking do with it whatever I want (as long as I pay it back later on) ... as if it was my own money? Or there is restictions?

 

[kulture]

If you borrow money, then it is up to the person/organisation who lent you the money to put on and enforce restrictions. It is nothing to do with the law. If you sign a contract when you borrow the money then you will be held to that contract.

 

[Lease4Less]

Yes , they want a share of the profit. So if I borrow the money then its ok to share the profits?

If I borrow the money, can I legally speaking do with it whatever I want (as long as I pay it back later on) ... as if it was my own money? Or there is restictions?

Are you sure that running a business is the best career move for you?You seem to have great difficulty understanding the simple answers that have been suggested.I'll try and simplify it for you.Borrow 5K from friend A. You invest 5K to your company and this money sits on your loan account. When you are in a position to repay your friend the 5K you take the money back off your loan account and pay friend A back. It isn't rocket science. Alternatively friend A can invest 5K in your company and take a share of the profits, thus making a return on his investment. Either you are a spammer, or you are having trouble understanding this. Either way, I'm not sure opening a company is for you.

 

[pk70]

Are you sure that running a business is the best career move for you?You seem to have great difficulty understanding the simple answers that have been suggested.I'll try and simplify it for you.Borrow 5K from friend A. You invest 5K to your company and this money sits on your loan account. When you are in a position to repay your friend the 5K you take the money back off your loan account and pay friend A back. It isn't rocket science. Alternatively friend A can invest 5K in your company and take a share of the profits, thus making a return on his investment. Either you are a spammer, or you are having trouble understanding this. Either way, I'm not sure opening a company is for you.

Ok, I think I understand this. This is a good option. Obviously I need to get details of these from an accountant, but good to know the options.

And yes, i want to open a company to get profits

 

[kulture]

And yes, i want to open a company to get profits

If only it was that easy!

 

[internetspaceships]

If your income yearly was £8000, would you be totally happy to pay like £5000 for all kind of paper work and legal issues? Or would you like the idea to just start without this heavy legal work , if possible, and do it possible when you get more money?

Are you saying your yearly income from the business is £8000?

 

[kulture]

To be honest I think that the O/P is wasting our time. If he is genuine then he should simply go see an accountant and get all these basic questions answered in a matter of minutes. He would also, hopefully, come away with a better idea of how to set up a business and finance it etc. As it is all these silly comments like " Or would you like the idea to just start without this heavy legal work , if possible, and do it possible when you get more money?" seem to be there just to wind people up, or demonstrate a fundamental misunderstanding of business. If the o/p is genuinely this puzzled about initial finance, then little things like profit and loss accounts, legal liability insurance, and tax records with be a complete mystery.

 

[pk70]

"Are you saying your yearly income from the business is £8000?"

Its not really the point. I know many-many people in my business area who would be totally happy to start with that kind of yearly profits. Next year it can be then double... Also I dont see any problems to start with that kind of profit, actually quite good start. How much do students get yearly? hmmm, not so much... but still universities are full...

To be honest I think that the O/P is wasting our time. If he is genuine then he should simply go see an accountant and get all these basic questions answered in a matter of minutes. He would also, hopefully, come away with a better idea of how to set up a business and finance it etc. As it is all these silly comments like " Or would you like the idea to just start without this heavy legal work , if possible, and do it possible when you get more money?" seem to be there just to wind people up, or demonstrate a fundamental misunderstanding of business. If the o/p is genuinely this puzzled about initial finance, then little things like profit and loss accounts, legal liability insurance, and tax records with be a complete mystery.

I think people are now mixing up big and small companies here! You seem to be talking about big systems here.... but remember there are thousands and again thousands of very small self emploiment people, some of them 20 year old, who try to earn their own money. Of course they start small... And heavy paper work/law fees would definitely kill their start. Well they could of course try to save couple of years... but some people just like to start rather immediately than in 2years. Maybe its the only thing they can really do well. Maybe they cannot get another job (is it better to sign on jobcentre 2 years or start small business?) ... maybe.... maybe... there are reasons for this kind of settings.

No ..... just something to think about.

And yes, I am thinking of accountant services. But because my business is so small now and my business so simple, I first try to solve the problems myself or with cheap advices.

 

[JElder]

I know many-many people in my business area who would be totally happy to start with that kind of yearly profits.

Remember most new startups make no profit for the first year or so! Can you afford to live with no income for a year?

 

[Chris Ashdown]

What a load of bullshit, anyone can just startup as self employed and do anything from brick laying to car booting at no administration costs except preparing year end accounts,

You can also buy a limited company for under £50 and hev no further costs till next year at year end

With either there is a certain amount of paperwork but not that much

many people start on a few pounds trading and then grow the business to be very large i.e. multi millions, but only those who take the time to read about being a manager and making it happen

Regarding loans just ask yourself if you would lend your money to someone who came to you with the same plan.

Spend your time building your business and not wasting it on tax avoidence, building the company makes you lots of money, tax avoidence takes hours of your valuable time, might save you a few pounds this year but eventually cost you a massive fine and possibly prison and loose your company, so stop bucking the system, read some free business books at your local libary and make your millions and stop this crap

 

[kulture]

I think people are now mixing up big and small companies here! You seem to be talking about big systems here.... but remember there are thousands and again thousands of very small self emploiment people, some of them 20 year old, who try to earn their own money. Of course they start small... And heavy paper work/law fees would definitely kill their start. Well they could of course try to save couple of years... but some people just like to start rather immediately than in 2years. Maybe its the only thing they can really do well. Maybe they cannot get another job (is it better to sign on jobcentre 2 years or start small business?) ... maybe.... maybe... there are reasons for this kind of settings.

No ..... just something to think about.
.

I was talking any company, especially small. The size of a company does not take away legal obligations. And it is not heavy paperwork. Just essential paperwork.

 

[JElder]

What a load of bullshit

Nice.

Depends on the business, of course. A self employed plasterer will need tools and transport.

A shop will need a fitted out premises, stock and staff.

A software development company will need a developed product and sales of some sort.

A consultant will probably not need anything but their own vehicle and a laptop.

As the OP has not given us any details, we do not know the kind of capital costs, or the expected set-up time. One client I worked with needed regulatory approval that takes 6 months on average.

 

[pk70]

Remember most new startups make no profit for the first year or so! Can you afford to live with no income for a year?

Not really at this point. To live with no profits in my situation would mean I need to claim benefits.

 

[pk70]

What a load of bullshit, anyone can just startup as self employed and do anything from brick laying to car booting at no administration costs except preparing year end accounts,


Spend your time building your business and not wasting it on tax avoidence, building the company makes you lots of money, tax avoidence takes hours of your valuable time, might save you a few pounds this year but eventually cost you a massive fine and possibly prison and loose your company, so stop bucking the system, read some free business books at your local libary and make your millions and stop this crap

Lets try to keep this discussion on the issue itself...

This was not so much about tax avoidanca, but legal fees linked to business startup.

But please.... there are legal, and even good, ways to avoid certain legal big fees at least at the start... just to be able to start. Like somebody already mentioned, I could legally just borrow money. Whats wrong in that? Am I avoiding fees by doing that? Yes, but whats wrong in that to make a good immidiate start. I would not call that "avoiding taxes" etc... its just wishdom. If its legal, then you are allowed to do it. Simple as that. And about the moral issue,,,,well, different ppl can have different opinion on the moral issue. I think its totally moral sometimes to use common sense and avoid unreasonable fees etc. if that gives a big boost for what you are doing.

 

[pk70]

I was talking any company, especially small. The size of a company does not take away legal obligations. And it is not heavy paperwork. Just essential paperwork.

REmember, I am all the time speaking about *legal* ways to avoid big fees. I am not against fees if its linked properly what you are doing. LIke a online company selling worldwide something.... then I am for that they need to follow all the selling rules and regulations and pay corresponding fees... If i was that big company I would do all that.

What I am speaking here, is that there is small start and need to start quickly what you do. I cannot ask my friends to give me big money for all kind of fees to "do like most others are doing". They are not interested in fees but what can I give to them - and this is natural.

Yes, if I continue doing what I do and get big money... I have no problems pay all kind of fees after some years. It would be only small portion of my income. But these fees to kill my beginning... no thanks.

At the beginning of the business I try to avoid unnecessary fees because its a matter of being able to do the business at all. remember, people are different...