New business, who should be director?

Tabooti69

Hi,
My husband an I are in the process of starting a new business, we are about to register it with the IR as a LTD company, my husband is in full time exployment whilst I am a stay at home mum, should we register the business in just my name, as he is already a tax payer or can we register in both?
Thank you

Suarez

You can both be directors. Doesn't make a difference to who can draw a wage.

trailingspouse

If you are both directors, would you be planning on having equal shares? If you do this, then you have to pay yourselves equal dividends, and this could put your husband into the 40% tax bracket. Personally, I wouldn't say that was a problem - if you earn enough, you have to pay 40% tax, and that's a nice problem to have. But it bothers some people. If you decide to pay him only enough to take him to the upper limit of the 20% band, then you can also only take the same dividend as he does, which limits your earnings too.

Whether, as a result, you'd be better being the sole director, or whether you should go for, say 20:80 share split or similar, would be a question to ask your accountant.

Savvy_Sue

And I think it would generally be a very good idea NOT to have equal shares, because what will you then do in a deadlock situation?

I know you can't imagine the day when you want to do different things with the co when you're looking lovingly into each other's eyes, but couples DO fall out, and neither of you being able to over-rule the other doesn't make the situation any easier.

Tabooti69

Thank you, so can i just clairfy - if we were to register both of us would his payslip from his current job show that he is paying more tax once we start making money from the new business or is this seperate?

InsideInsurance

Tabooti69 wrote: »

Thank you, so can i just clairfy - if we were to register both of us would his payslip from his current job show that he is paying more tax once we start making money from the new business or is this seperate?

You would register the company with Companies House and let HMRC know you are now directors/ significant shareholders which will trigger you to have to do self assessment tax returns.

His tax code may change, as everyones can over time, in which case his other employers would be notified of the new code but there would be no way for them to know why the code has changed.

They update their PAYE calculator with the new code and his pay will be adjusted to reflect this. His payslip from them would only reflect the tax he is paying from that salary. He will have another payslip from your company if he is drawing a wage from that and then all this plus dividends etc goes onto the self assessment tax return and you get a bill for anything outstanding

Lovelyjoolz

trailingspouse wrote: »

If you are both directors, would you be planning on having equal shares? If you do this, then you have to pay yourselves equal dividends,

Not necessarily. You can have different classes of shares, only some of which pay dividends.

Opinion

Lovelyjoolz wrote: »

Not necessarily. You can have different classes of shares, only some of which pay dividends.

This is what we have done and it works well.

If you're setting up a business bank account, a lot of banks will want to meet/verify anyone that has a shareholding for 20% or more, so if one of you has any CCJ's or the likes you might want to consider that.

c-m

The directors and owners don't have to be the same people. As well as there being different types of shares, you can also specify different values of ordinary shares e.g £1 and 10p.

If worries about your husband reaching the 40% tax bracket, you could issue preference shares which have a fixed percentage return, or even differed ordinary shares.

It can be quite complicated to does require an element of forethought.

Opinion's post about the banks being interested in anyone with 20% or more stake in the business is interesting.

Opening a business bank account can be hard if you have defaults and/or CCJs, so it's always worth double checking your credit histories before applying.

Aquamania

Lovelyjoolz wrote: »

Not necessarily. You can have different classes of shares, only some of which pay dividends.

And such different classes of shares can also have different voting rights.

But it would be unusual for a couple starting a small business for the first time on their own to set it up initially as this, especially without professional advice.