URGENT -What does being a shareholder of a limited company mean for me?

[Namechangerneedinghelp]

My H is setting up a private limited company.

I am SAHM with no income.

He wanted me to be a director but I said no as I was worried about being liable for any potential future losses.

So today he has told me his accountant has said I should be a shareholder.

He has not dicussed it with me at all. I dont know what any of this means. I dont know anything about being self employed.

He wants me to send my NI number and fill out a form his accountant has sent him right now today.

Is this a wise move and what will this mean for me? Will I be liable for any losses?

If I say no now whilst I find advice can I become a shareholder or director later?

He has just landed this on me out of nowhere and is insisting I reply today.

Feel pressured but no idea what I am signing up for tbh.

It means he can pay you dividends without you having to pay tax.

Well, if you're married, the chances are that ultimately you're liable anyway as he is and therefore if things go wrong, he would have to pay out. So, assuming you're married and together, you're liable anyway.

However, as a shareholder, you own half the company and if nothing else, in the case of a divorce he simply couldn't take that away so you'd be ina stronger position.

From a tax perspective, you and him are better off this way as you will each receive dividends. That means if the company pays a dividend of £100, you will each get a percentage based on your shareholding. So you would each pay tax on £50 say. Rather than him paying taz on £100. This can work out to be a significant saving.

ytou don't sound like you particularly trust your H or are supportive of his business though.

No our marriage has been rocky recently. I have been quite unwell recently and really anxious of the future and what being self employed means.

I feel a bit pushed into the current situation with little discussion. We are in the middle of moving house (well in a few weeks time) and was planning to get a job although it wont be a "proper professional job" just minimum wage I expect, but have been waiting for the move to find work.

I don't know why I just feel really frightened and anxious about it all.

Thank you for replying so quickly.

Well, if you're married, the chances are that ultimately you're liable anyway as he is

The whole point of a limited company is that in most circumstances the shareholders and directors cannot be held liable for the company's debts.

The whole point of a limited company is that in most circumstances the shareholders and directors cannot be held liable for the company's debts.

It's well worth understanding the circumstances that aren't covered by "most".

I would request you talk to the accountant as your dh and him would like you to be included in this somehow.
You need them to explain it properly to you.
Phone the accountant up now and ask him/her about benefits to you and to the company for either position.
It shows the accountant that he is accountable to you as well,as your dh.
It is not just a question of 'just sign that there love will you'
Ask questions, it could be a good thing for you, it it's still your decision

I'm a director of a limited company with my DH.

We each take a wage through the PAYE scheme, and any other money that comes to us is taken as a dividend because we are each shareholders. This means that the tax we pay is a bit less on a dividend than if we take the money as "wages". You do pay tax on a dividend, just not as much.

And as for being liable - the point of a limited company gives us protection. If the company was to get into financial trouble, our house is protected and cannot be touched.

It's a little weird, because we are self-employed, but also employed through the company we actually own!

However, as a director you are personally liable for certain things, like getting tax paid promptly etc. If the company doesn't play the game right with HMRC then directors are personally responsible for it and can be fined.

However, I don't really understand what his rush is, and why it all has to be done today

The liability of shareholders is limited to the value of their shares.

However, you can be a shareholder without being a director.

With a small company, it is unlikely that anybody will give him loans and credit on the basis of a personal guarantee, so it's not possible to hide behind a company, and whether or not you are a director, you are likely to be affected if he can't pay his creditors.

The overwhelming impression you give though is that you have a gut instinct that something is wrong and you are being forced to do something you don't understand. You shouldn't sign anything if this is how you feel.

it is unlikely that anybody will give him loans and credit on the basis of without a personal guarantee

Also, a company can be loss making, but financially stable.

(Just look at the likes of Starbucks!)

The problem is not so much making a loss, but not being able to pay your bills.

It's likely though that as others have said, the reason the accountant wants to set you up as a shareholder is so that you can receive dividends and make full use of your 'tax free' personal allowance, which at the moment, from an accountant's point of view, is wasted.

The liability is limited to the amount paid for the shares, not their actual value (which may be much higher).

Whilst the corporate veil can be pierced for directors acting inappropriately (ie: they can be personally liable for an unlimited amount depending on the wrongdoing), shareholders will only lose what they have put in (unless they are partly paid shares when the remainder would also be payable on a liquidation).

A shareholder is the investor, a director runs the company.

As Merrymouse said, for small businesses and start ups personal guarantees are often required for things like bank loans/overdrafts and property leases. This means that regardless of the limited liability, the business owner/director will be personally liable for those debts. Sometimes this takes the form of charges over personal property (ie: your home) Whether or not you are a shareholder or a director it is this that will reflect on your situation as your husband will be asked to commit to these things.

Am a director and shareholder of our Ltd company. You are getting yourself into a flap over nothing, in my view.

girl if the DH has worked lined up that needs to go via the company, then there could be a hurry. It doesn't mean there is anything sinister.

The liability is limited to the amount paid for the shares, not their actual value (which may be much higher).

Yes, that is the more accurate.

Be aware that as a shareholder any dividends declared are classed as your income even if you don't actually see the money. This would have an effect on any benefits etc or at the other end of the income scale you could lose your tax free allowance and actually pay more tax.

As a director you have certain statutory duties towards the company. If you had no involvement in the running of the company and no knowledge of its affairs then if the company went into liquidation you could be equally liable with other directors for any misconduct because you didn't do anything to safeguard the company/creditors. Shareholders don't have any such obligations.

Thank you for your replies. Do I have to overcome a shareholder right at the very start of the business like today or can I sign up in a week or two when I have got my head around all this.
I know I sound pathetic but my head is shot. I have so much going on right now I am really really stressed out.

He is insisting I sign today. I don't think his first contract / work is until August.

Become not overcome. Sorry auto correct being a pain.

I would say that regardless of any accounting or tax implications they should not be forcing you to become a shareholder.

It is less hassle to do the paperwork all in one go and there may be reasons to start the company today. However, the acountant should be able to explain them to you in a way that you understand.

No legal reason why you can't become a shareholder at any time but there may be tax or commercial reasons for wanting you in at day 1, e.g.:

• the value of the company is likely to go up once it starts doing and acquiring things so for maximum 'recognition of value increase' you would want to start at the beginning when the company has nothing
• for tax/structuring reasons they may want you to be the sole shareholder (i.e. hold 100% of the shares)
• For tax/structuring reasons there may be a certain percentage that they don't want your DH to rise above so need you in on the deal from day 1
• they might just want all the 'paperwork' over in one go

However I wouldn't be having anyone, especially my DH forcing me into anything and stressing me out with it. Just not acceptable on any front. Did you sign up in the end?

No not signed yet. Have a list of questions for the accountant and will take it from there.
Thank you for helping everyone.

Can anyone tell me what happens if for any reason I don't want to be shareholder in the future after I have become one?

In that situation you would have to sell your shares. For a small company like this there will probably be rules in the Articles of Association to limit who you can sell them to so that your DH doesn't suddenly find that half the company is owned by someone else.