Start up to scale up

Early planning to grow and protect your wealth

The situation

Two co-founders operating an early phase business, both have young growing families. The owners are focused on scaling the business and reinvesting profits to drive growth.

Planning to protect and extract wealth is not a priority, however, they want to ensure that their personal tax positions are as efficient as possible.

Learn more: startup success - the evolution in our approach to work

The optimum is to find somewhere in the middle, where you can make the business a success but also achieve the lifestyle and personal goals you’re aiming for.

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The founders wanted to:

> Give their company the best start and ensure it is set up for success.

>Ensure they are maximising the personal tax reliefs and allowances available.

>Pay themselves tax efficiently, whilst still allowing the business to grow.

Objectives

Learn more: what is the purpose of tax planning?

It’s vital that your tax planning process doesn’t just look at the business. It’s equally important to look at your personal goals and how you can manage wealth in the most efficient ways possible.

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Our solution

Our review of the owners’ use of tax allowances and reliefs opened a conversation about their future ambitions for both the business and personally.

Our private wealth specialists spotted opportunities, which could offer significant tax savings for the business and the owners personally, in the future.

Benefits of implementing an early stage holistic approach:

Cost savings

At the outset we discuss suitable shareholdings to fit with the business relationship.

Implementing key schemes at today’s cost is far more cost effective than doing so once the business has grown and increased in value.

In this case we suggested shareholdings for the company at the outset to ensure the aims of the founders could be achieved. Changing shareholdings later when the company has value can have large tax consequences and be very costly.

Learn more: structuring your business to protect assets

How owners can optimise the structure of their organisations to protect assets, reduce liabilities and plan for the future.

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2. Protecting wealth

Putting the right structures in place with regards to the ownership of assets, be these shares, property or other investments to protect personal wealth.

To assist with protection for the client, we worked in collaboration with our in-house solicitors, on the wording for a shareholder's agreement to ensure the shareholders rights were protected. We also allowed for the possibility of future investment and shareholders.

Implementing the right structure enables the business to flex as needed in order to maximise on growth opportunities as they arise.

3. Tax savings in the future

Early planning that would help the founders meet their personal financial needs in the future, for example, funding the family.

At this stage, we informed the client about the various forms of remuneration and the tax costs.

Other recommendations included:

Suggesting family members work for the company in order to utilise more personal allowances
Recommending they review pension contributions as these are tax efficient for both the company and the individual, although not a priority
We also considered whether Key Man Insurance would be suitable for the organisation

4. Investment and rewards

We considered opportunities for inward investment, and potentially rewarding the current team tax-efficiently.

We discussed the possibility of any potential investment and the rules regarding different investors reliefs, to make sure the company is as attractive as possible to investors. We also discussed the potential for share option schemes, including EMI options.

Outcome

The owners can better secure their personal wealth and now have a clear understanding of what is possible for:

Remunerating themselves tax-efficiently
Remunerating and rewarding staff tax efficiently
Attracting future inward investment
Protecting their assets in the future

By putting in place a suitable structure from the outset, we can adapt and evolve it as the needs of the business owners change.

_{When you’re in the early stages of the business it’s important to work with an adviser who is as invested in your journey as you are and who will prompt discussion around key areas of planning.}