Adding an Additional Shareholder to your LTD company might be something you're considering; or you might be wondering what impact this could have.
- All LTD companies must have at least one director and one shareholder.
- You can also choose to add additional directors or shareholders to your company.
- If you are a company shareholder then you're entitled to draw dividends according to the share split.
Benefits of adding an additional shareholder:
The main benefit of adding an additional shareholder is that dividends are paid to two (or more) people, which means it can be a more tax-efficient way to withdraw funds from the company. For example, if one person takes £60,000 dividends, they'll split, £60,000 could still be drawn from the company, but would be £30,000 each - so neither is a higher rate taxpayer.
Important things to note about adding an additional shareholder :
- Shareholders should ideally be added when the company is first formed so that is clear from the beginning the company will have two (or more) shareholders. The must be a commercial reason to add an additional shareholder.
- Both shareholders must be paid the amount they are due.
- Share split should not frequently be altered or adjusted between shareholders as this can signal to HMRC that you're attempting to avoid tax.
Potential drawbacks of adding an additional shareholder:
If the business relationship ends, the shares won't automatically transfer back to the remaining shareholder. Putting an additional shareholder in place means you're giving them an ongoing entitlement to receive dividends from the company.
Get in touch to find out more:
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