A Family Investment Company helps you pass on assets and the impact of Inheritance Tax (IHT), then maybe a Family Investment Company (FIC’s) could be for you.
In essence, it enables long term tax planning where you can retain control of the company until such a time you decide to pass it on. One benefit is that an asset value increase would not form part of the original individual’s estate.
Your Company would be set up with different Share classes with different rules attached to them, A Shares may have control; however, B may have all the dividends and value. One is control, and the other has the benefit.
Any dividends extraction would be subject to regular tax rules although again that would still be within your control.
Pass on Assets outside of Inheritance Tax (IHT)
Stay in Control of the Company
One of an entrepreneur’s common elements is to pass on companies to family members; however, control can then be an issue. Often there are disagreements, or more importantly, the skillset and knowledge are missing to run the company.
How do you pass on an asset but keep control?
Family Investment Company (FIC’s) is a way to pass the benefiting shares of a company on to several family members and retain shares that give you control.
How do the FIC rules work?
The rules follow a Shareholders Agreement and will need to be specifically written for this purpose and an Articles and Memorandum document that is designed for a company.
Within these documents, it will state what the company and shareholders can and more importantly cannot do.
What if I want to remove a shareholder from the Family Investment Company (FIC’s) ?
This is possible as long as the reason falls within the Company Documents scope, you can sue the good/bad leaver clause; however, there are some limitations as the value would be needed to be quantified.
This works well if you have property within a company and want to pass it on, without losing control.
However, like anything, there is more in detail for example, marriage divorce or will impact so a Last Will and Testament will be needed to agree what happens to your controlling shares.
There is legal and accountancy work needed to incept a company and advice should be sort before any actions are taken.
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