Family Investment Company (FIC) is a UK-resident private limited company, where the shareholders are family members. So, starting a family investment company means you are following the right strategy succession through inheritance where the wealth planning is quite efficient.
Previously, a Trust is considered as the reliable channel to pass the wealth to the future generations. But owing to the recent tax law revisions, maintaining a trust is not at all a tax efficient choice. This is where setting up a family investment company makes more sense as it offers great tax benefits with almost 20 percent from the total profit earned.
Before knowing how to set up an FIC, you should be exactly aware of how it works.
How does a Family Investment Company Works?
A FIC is formed by the parents of the family limited by shares. Each parent owns one master share ‘a’. Each of the ‘a’ shareholder has full right to appoint a dedicated director, and enjoy the right to vote at overall meetings. But the parents have no power to dividends or any return of investment. The children of the parents have one ‘b’ share each. Children holding the ‘b’ shares cannot enjoy the voting rights and other control rights, but full right to any dividends or return on investments, provided they are approved by the parents.
How to start your own Family Investment Company?
1. Come up with a responsibility agreement
This is the first step to start a family investment business, where the company memorandum, and the articles of association that are specially designed for the specific family requirements. Typically, the agreement should define the roles and responsibilities of the directors, define the type of business to be commenced, and the mode through which the shareholders can have control over the board of directors.
All these details must be clearly drafted and maintained.
2. Register the FIC properly with the Companies House
As said earlier, FIC is a UK-resident private limited company, so it is inevitable to get registered with the Companies House to avoid legal penalties and enjoy the trustworthiness from the customers and legal parties.
Generally, it requires the domain name, registered office address, and other supporting documents that prove your business intention and will act as a proof. There will be more form filling and visits to the Companies House if you are not aware of the exact requirements and the latest practices. Company formation services from specialized vendors can provide great help that can reduce substantial amount of time and energy spent.
3. Money Transfer by Donor
A donor typically transfers the cash to the company in the form of a loan, so that the beneficiaries can subscribe the held different forms of shares immediately. By this time, the beneficiaries will go through the process of satisfying a private document where the settings of directors’ power and the shareholders’ rights are determined.
It’s maybe another sign of the altering tax times that a UK resident company is now considered as the better choice for UK investors. This is a great time to start a Family Investment company to shield the wealth within the family.
Your family investment company as said earlier should be registered with the companies house before it can start trading, we can help you register your company in just 3 simple steps online.