New employee... director or not?

[Pab]

Hi all,

My company is expanding and I'm looking to take on a new person... my brother loves what we do and has decided to leave his (rather excellent) job and join the team.

He's not going to be a shareholder of the company (only my business partner and I own the company) but he's going to play quite a pivotal role in the future direction of the business.

Thinking about costs to my business, what would be the best way to employ him? Do we just pay him as we would a standard employee, or are there benefits to making him an official director (I don't mean shareholder, so not dividends).

So my question is, what is the most cost-effective way of employing someone if it was no problem is they were a director or not?

Thanks in advance.

 

[DIY Accounting]

Appointing your brother as a director would be your personal choice as all directors are officially employees of the company anyway if they receive payment.
I don't see a lot of issues here that would determine whether he was director or not so perhaps employ him as an employee and decide on directorship at your leisure.

I would think he would welcome becoming a director for the title only and that might motivate him to give his best to move the business forward.

 

[Pab]

Many thanks Terry,

He is able to bring a lot to the table, both in terms of his experience and ability, so making him a director would not be a problem at all.

I just didn't know if there were any (legitimate) tax advantages that we could exploit as his employer... or by him as a non-shareholding director.

 

[Zeno]

Just to play the prophet of doom here but have you read some of the other posts concerning bringing family into your business?

 

[Pab]

Just to play the prophet of doom here but have you read some of the other posts concerning bringing family into your business?

A very valid comment indeed. The pressures of business bring a new dimension to relationships and it's one we have discussed 'ad nauseum'.

He's coming on board of his skills first, and as family second. I'm wholly confident (as is he) in our strength as colleagues and as family, but it's something one will always be mindful of.

A point well raised though... There are some horror stories out there!

 

[DIY Accounting]

There aren't any tax advantages to being a director or not as directors are treated as employees of the business. Income tax and national insurance is the same for a director and an employee. The directors National insurance can be calculated on an annual basis or cumultaive basis rather than a month by month basis but at the end of the year the rates charged are the same so makes no real difference.

No differences in corporation tax etc.,
Only other area where it could have an impact would be the special rules that apply to a directors loan account with the company which is a whole other area as would be benefits and the P11D.

Basically make the appointment you think it best for the business.
Not going to affect the tax position very much.

So comes down to your personal decision