TAX TIP OF THE WEEK - New investor in your start-up?

You have found someone who wants to invest in your new start-up company. The trouble is they want a share of the profits meaning they will hold shares. Your not keen on giving away control so what can you do?

Most business angels will want to hold shares in the new company instead of just lending the money. This is because they are likely to get better tax relief options should the investment result in a loss. 📉

However, giving away shares normally means giving away control and decision-making power. 💪

To keep both you and the investor happy rather than issuing the normal ‘ordinary’ shares, you could issue variable-rate ‘preference shares.

These don’t carry voting rights, but you can specify that the dividend rate is directly dependent on the profits of the company.

In addition, the investor would get the same tax relief that would be available on loss-making ordinary shares.

Therefore both investor and entrepreneur are kept happy 😀
I hope this was helpful, for lots more tax tips and strategies get a copy of our 71 ways to save tax checklist.