Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

Money matters

Find financial and money-saving discussions including debt and pension chat on our Money forum. If you're looking for ways to make your money to go further, sign up to our Moneysaver emails here.

Flip

Original poster

Directors profits

9 replies

Button2121 · 15/04/2022 16:37

Hi. Separated couple, both directors, husband 60%, wife 40% share in business. Husband is in the process of buying wife out of business but she is asking for a share of the profits for the last 4 years. Their company profit was in region of £85k pa. Is she entitled to 40% of £85k per annum? Can anyone help?

OP posts:

IDontHaveAnOutingHobby · 15/04/2022 21:00

Doesnt make sense

If she owned 40% of the shares then she should have received 40% of the dividends for each years was a shareholder (and paid tax on them)

Is that what you are asking?

ThreeFeetTall · 15/04/2022 21:06

Do you mean that's how she's calculated the value of the business?

IDontHaveAnOutingHobby · 15/04/2022 21:08

@ThreeFeetTall

Do you mean that's how she's calculated the value of the business?

But if it is a business based on her DH as a the sole earner then it has no value as he can just close it and start another business

HesGotHisTrombole · 15/04/2022 21:15

If they are undrawn profits then they are represented by cash or other assets in the company, so yes a 40% shareholder is entitled to 40% of the assets

Original poster

Button2121 · 15/04/2022 21:26

They separated 2018. She has had a wage £1k per month plus quarterly dividends of approx £4-6k per quarter. DH is now trying to buy her out of the business after getting 2 valuations. She is now asking for directors profits on top of 40% of the mid valuation? He is confused?

OP posts:

notapizzaeater · 15/04/2022 21:33

She's had the profits as dividends ?

Comefromaway · 15/04/2022 21:36

Most directors do not withdraw the entire profits as dividends or there would be no working capital.

SeasonFinale · 15/04/2022 21:40

If they have declared dividends already for those years then she has had her share of profits for those years. Even then if no dividends were declared because profit was retained that shows in the value of the company at today's date. If he is buying her out then she is entitled to 40% of the value of the company. Have they agreed a value (after valuation)? Also as a pp said if most of that value is based on his knowledge he can simply reduce the value by resigning himself and starting a new company.

WeeFinbar · 15/04/2022 21:42

The valuation will have include the retained earnings that have not yet been paid out as dividends. Should further dividends be paid out before he buys her out, it will reduce the valuation by the same amount. Nil effect, but might be more tax efficient as full buyout due to some tax reliefs available. (Not looked at personal tax in a while!)

Flip