Boyfried and girlfriend

reader

Would anyone have any problems setting up a new company with a boyfriend and girlfriend both as shareholders who say they are going on to to get married at some point?

The boyfriend will be running the business. The girlfriend is effectively a tax mule.

I'm just interested from a tax point of view rather than the legal/control point of view.

Worth using A and B shares? She has no other income.

Is the settlements legislation a problem here?

MarieNoelle

See TSEM4325

reader

Thanks, great link, some nice examples too:
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4355

KoopaCooper

There's certainly no problem that would stop you from setting up a company with a boyfriend and girlfriend as the two shareholders...

...but I do actually have at least a couple of clients whose companies are currently snared in domestic disputes because the two shareholders are husband and wife and are going through a rather messy divorce (one of the couples also has kids, making it even messier sadly).

reader

Well even if the business was just own by the husband (as an example) in the event of a divorce the other spouse (the wife, for example) would still be entitled to 50% of his assets, including his company shares

Although, I take your point, i.e. it makes the situation even worse if she currently has shares, especially if she has more than 25% of the voting rights

KoopaCooper

Both the companies I'm dealing with have the husband as the sole director, but the wife has equal shares and equal voting rights. And they do NOT get along anymore. >_>

reader

Yes, it is pretty obvious that they don't get along any more hence the divorce. I reckon it would be very rare for a husband and wife to get a divorce and still get along. There's obviously serious issues between the husband and wife hence the divorce and the divorce proceedings will only make things worse because of all the arguments.

The setup you mentioned is how I imagined it would be because it is very common, i.e. same setup as the arctic systems case.

The point I'm making is even if the husband owns 100% of share capital the wife would still be entitled to 50% of the husband's assets on divorce. So whether the wife is or isn't a shareholder to some extent is irrelevant. However, I guess ideally, you would prefer her not to be a shareholder however she would still be entitled to 50% of his assets on divorce (unless there is some sort of pre-nup in place which is unlikely)

KoopaCooper

But if they're equal shareholders, then surely if she's entitled to 50% of his shareholding, that means he's entitled to 50% of her shareholding as well? (assuming equal division of marital assets) Therefore, they'd each just end up with 50% of the shares still, wouldn't they? Or am I missing something there?

(Just as an aside, my own parents got divorced 15 years ago, but are still reasonably good friends. It's definitely not the norm though, of course, but just thought I'd throw it out there)

reader

If the company is already owned 50:50 then there's nothing further to do, unless he wants to buy her share