Home – New Forums Money matters Can I issue more shares in my Company?

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  • #995469
    personalitee
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    Totally new at all this so please be gentle.

    My wife and I have run our own screenprinting and shirt supply business for 20 years now, and really want to retire gracefully in the (very) near future.

    We recently set up our company with just the two of us as shareholders (1 share each) and we are looking to sell the company to our son and his partner, as well as them moving into the family home which houses the business.

    My trouble is they do not have enough money to buy the house and business package at this stage and this is, well, our retirement money.

    My thoughts over the last few days are that if we could issue a total of 200 shares in the company, and then sold them 49% or 98 shares, we could retain control of the business just in case, but allow them to take all the profits from sales, less a nominal fee of $1 per shirt sold. Then they can move into our house and pay rent until such times as they can afford to purchase the house from us. We would build a second dwelling on the property for us to live in when home.

    I realise this is only the bare basics of the idea, but is it possible to do it this way, company wise? I have also taken into consideration things such as our passing, and distribution of shares between my son and daughter in that eventuality, so that he will then retain total control of the company.

    #1202081
    NickKaro
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    This can be done, although the structure needs to be tweaked because if you retain 51% of the ordinary shares in the company, you will receive that % of the profit. There are a few ways to get what you want to happen – i.e. issue B Class shares which different income distribution rights or pay wages to your son and partner to reduce profit, etc.

    The alternative is to transfer ownership of the company to a trust that you control, and distribute profits to your son and his partner. A family trust would provide greater flexibility than a shareholding. You can subsequently transfer control of the trust once certain milestones are met.

    The key is that this isn’t a simple arrangement and you should see a lawyer to ensure all the specifics are considered, the structure works as intended and you are protected if something goes wrong.

    Happy to assist if you do decide to engage a professional – my email is [email protected], direct number is 0401 154 313.

    Regards
    Nick

    #1202082
    personalitee
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    Thanks heaps Nick! I should have said that we would pay them a wage/salary that encompassed all profits. We certainly won’t be jumping into anything without professional advice, and just wanted to make sure what we want to do is feasible…looks like it is :)

    #1202083
    Easysmb
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    Hi There,
    There are many ways to get it done. Issue shares is just one way, but is that the tax efficient way?
    What is the fair value of the business?
    Do you take advantage of the small business concessions?

    Tax complications should be one key area of consideration, please talk with your accountant to work out a plan based on size of the potential transaction.

    Good luck.

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