Advantage of being a Director?

I think that's the point, you are not liable...though I might be wrong
 
Unless you're getting a suitable salary increase or shares in the company to compensate, there aren't too many benefits to being a director that I can think of. But there are duties and responsibilities. You could be liable if a company was proven to have traded wrongfully or illegally but in general, for normal trading losses, no.
 
Isn't one plus point that you pay yourself a dividend instead of a full wage and so possibly have some sort of tax break/loophole (not illegal) benefit?

this sums it up quite nicely.

Linky
 
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Thanks for the replies so far. I've been offered a small shareholding of our family run business, along with the option of becoming the Sales Director. I am trying to work out by becoming a Director (which I believe may give me more say in the future running) whether or not I will be liable if the company were to legitimately get into trouble. Obviously if there were some illegal activities, then I would expect to have to face that, although this is a very sensibly run company which has been trading with a healthy profit for nearly 27 years. At present I am the Ops Manager and run the place on a daily basis and have done so for about 5 years now. I feel a Directorship is a step up onto the board to possible give me future opportunities.
It's all a bit new to me though., hence the advice request. (y)
 
Be a director you get more say in the company
Unless your being illegal or trading wrongfully then there is no problem

It's a limited company therefor your liability is limited the the shares you buy, if you pay £1 for your shares then if the company fails you loose your £1 if you pay £1,000,000,000,000 for your shares and the company fails you loose all that too. Your liability is limited to what you put in

On the other side them more you invest the bigger share of the profits you get too.

I work as an accountant btw
 
Dannhy said:
Be a director you get more say in the company
Unless your being illegal or trading wrongfully then there is no problem

It's a limited company therefor your liability is limited the the shares you buy, if you pay £1 for your shares then if the company fails you loose your £1 if you pay £1,000,000,000,000 for your shares and the company fails you loose all that too. Your liability is limited to what you put in

On the other side them more you invest the bigger share of the profits you get too.

I work as an accountant btw
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Cheers for the info. The shares are being offered as a free beneifit-in-kind valued at £20k. I would have to pay the tax only on this (around 40% - £8k). Would this make me liable for £8k in the event of company failure?
 
wippers said:
Cheers for the info. The shares are being offered as a free beneifit-in-kind valued at £20k. I would have to pay the tax only on this (around 40% - £8k). Would this make me liable for £8k in the event of company failure?
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No the debts will be or should I say should be in the company name not the individual.
 
Tax purposes are the main benefit. You pay yourself the tax free allowance of £10k as salary then payout dividends which are taxed at just 10% up to £34k. So you have earned £44k annually and paid just £3400 income tax.
 
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Dannhy said:
if you pay £1 for your shares then if the company fails you loose your £1 if you pay £1,000,000,000,000 for your shares and the company fails you loose all that too.

I work as an accountant btw
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Then you should know how to spell lose!


Steve.
 
Steve Smith said:
Then you should know how to spell lose!

Steve.
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Accountants are good with numbers not spelling lol
 
gman said:
There are some numbers a few posts up that aren't right and crucial information missing. :p
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Suppose your an expert???? ;-)

Just a little overview ill keep quite in future
 
wippers said:
Care to elaborate? :shrug:
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I'm afraid I don't get involved in detail anymore thanks to a few members on here. But there's plenty of accountants about, although I've noticed an abense of any worthwhile free advice being given. The TP pond has been fished perhaps ;)



Dannhy said:
Suppose your an expert???? ;-)

Just a little overview ill keep quite in future
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Me? I don't know nowt. Your spelling is awful btw lol!
 
A couple of points from me:-

- Director should give you more say in the running of the business and as its a family business, keep the heritage going!
- Ensure you check that your share is an earnings share I.e. you could own 20% of the business assets but this could be non-earning assets and your income could be say 10% of total earnings.
- Tax advantage in payment through dividends and use of corporation tax (but making you pay sufficient for NI purposes)
- Being a limited company is better as your liability is just that, rather than being a Partner where your liability is joint and several which is harsh!
 
gman said:
I'm afraid I don't get involved in detail anymore thanks to a few members on here. But there's plenty of accountants about, although I've noticed an abense of any worthwhile free advice being given. The TP pond has been fished perhaps ;)

Me? I don't know nowt. Your spelling is awful btw lol!
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I'm most probably dyslexic so stop being a **** :)
 
Dannhy said:
Accountants are good with numbers not spelling lol
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I think they should be able to spell if writing to a client about losing interest on an account.

Don't worry. Loose vs. lose is probably the most common internet writing mistake. On another forum, someone responds to posts about loosing quality with "how was it loost?"


Steve.
 
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Steve Smith said:
I think they should be able to spell if writing to a client about losing interest on an account.

Steve.
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Your right that's all that an accountant does, interest
 
can the spelling nazis drop it please
 
gman said:
I'm afraid I don't get involved in detail anymore thanks to a few members on here. But there's plenty of accountants about, although I've noticed an abense of any worthwhile free advice being given. The TP pond has been fished perhaps ;)
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Couldn't you just post the id numbers of the posts that contain the correct info then?
 
Speak to your accountant and solicitor.
If you don't have them Get one of your own. (not the company one)

You clearly do not know what you should even be asking about. They can do all that for you...
they save far more than they cost.
 
tiler65 said:
Couldn't you just post the id numbers of the posts that contain the correct info then?
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I don't really want to go down that road as mein Uber Gruppenführer won't allow it. But what Terry says is the best advice.
 
Terrywoodenpic said:
You clearly do not know what you should even be asking about.
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I am purely trying to get a bit of upfront basic knowledge before speaking to a qualified accountant, so I may be able to go armed with some quesions. TP has always been very helpful to me whether photographic knowledge or other. Not sure I appreciate comments like this, but thanks all the same.
 
wippers said:
I am purely trying to get a bit of upfront basic knowledge before speaking to a qualified accountant, so I may be able to go armed with some quesions. TP has always been very helpful to me whether photographic knowledge or other. Not sure I appreciate comments like this, but thanks all the same.
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You are taking that out of context wippers......

Terry is saying BECAUSE you have less knowledge about it, it is best to seek professional help!
 
gman said:
I don't really want to go down that road as mein Uber Gruppenführer won't allow it. But what Terry says is the best advice.
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Not sure I understand but hey ho nobody can force you to do anything but it is a bit hypocritical considering you have 'Help Please' thread open at the moment. IMO of course.
 
I'm the only one who has posted figures so it doesn't take a genius. I should have been more accurate with the personal allowance i said £10k but its £9440. Not that this would effect you as you are working anyway and over this already.
 
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directors have limited liability. You are, in effect an employee of the company, but obviously carry more responsibility. Health & safety issues for instance... it's not unknown for directors to be jailed when a serious breach of H&S has occured (eg. a death or serious neglect).

Also, if the company fell into liquidation you would not be liable for it's debts unless you had given personal guarantees (which some lenders would ask for and on occasion suppliers). I know one supplier who always asked for personal guarantees from directors in their account application forms. 10 years down the line the company folds and they completely forgot about the PG they had signed 'back in the day'.

Also, if the company liquidates, you would be entitled to redundancy pay based on the length of service. This is paid by HMR (or a division of them).

I would just check how the company propose to pay the £20k shares to you. Is this your first years dividends? Is it an extra PAYE payment (ie bonus)? The £8k personal tax deduction you mentioned would not come into play should the company fail. You'll have already paid it in tax.
 
There are a few disagreeable members crawling out of the woodwork in this thread. How about if you don't have a contribution to make you don't say anything? What's the point suggested there's an error somewhere if you won't be specific and correct it? What's the point in highlighting little spelling mistakes?

I'm disappointed by a couple of members in this thread!
 
also.. with the dividend route... the company has to have made (post tax) profits to cover the dividends paid out.

So, if the company pays out say £10k per month dividends to its directors (£120k pa), but the company then only goes on to make say £80k profit.. you have already taken the £120k between you all, so what happens with the £40k shortfall? HMRC would look at this as income and tax accordingly... so you end up with a personal tax liability. From there it can spiral out of control. Dividends are seen as a share of the profits being taken by directors.. but if the profits aren't there to take... you have a problem.
 
TriggerHappy said:
There are a few disagreeable members crawling out of the woodwork in this thread. How about if you don't have a contribution to make you don't say anything? What's the point suggested there's an error somewhere if you won't be specific and correct it? What's the point in highlighting little spelling mistakes?

I'm disappointed by a couple of members in this thread!
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Where's your contribution?

All I'm doing is pointing out that there's some stuff going on that's not accurate, therefore it would be wise to follow Terry's advice. Besides, there's plenty of accountants on here, perhaps they can "crawl out of the woodwork" and provide some free detailed advice?

As for the spelling, it was in jest, hence my "lol" after it. His reaction wasn't very nice but he included a smile so fair play I figure.



tiler65 said:
but it is a bit hypocritical considering you have 'Help Please' thread open at the moment. IMO of course.
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Not really, I've helped countless times in the past only to get crap in return (including from mods) and here it's happening again. I would say the amount of help I've given in the past considerably outweighs any help I've requested, but I don't look at it like that and was always happy to help (for free).


When people help me I always say thanks at the least. I rarely got even that.

Back to the figures, for starters Corporation Tax was being overlooked. As leftcurl has just said, Dividends come from profit after tax - but depending on your relationship to the company the benefit to you depends.
 
You really should seek professional advice from someone who can fully advise you as to the benefits and the obligations you would have as a Director. You also need advice with regard to the shareholding - it is not so much the value of the shares as the percentage of the total shares which matter. A minority share of less than 25% in a private company carries little benefit and would be worth much less than a majority share. You need advice as to whether the suggested "benefit in kind" value is reasonable. You also need advice as to how acquiring the shares in that way might impact in terms of Capital Gains Tax at a later date. To have any real control of a private company you need 51% of the shares. Talk to a qualified accountant!
 
It's always great to get everyone's views and opinions here on TP, and many thanks to those of you who have contributed to the thread, although I may have inadvertently opened up some old wounds for some from a previous thread. :thinking:
Based on what I've read, I've made an appointment to see an independent accountant to go through the figures and look at the pros and cons of both shareholding and directorship. (y)
 
Being a Director with shareholdings does benefit you in other ways in that you will have a much stronger vested interest in the performance of the company. The better it does then ultimately the better your return, in most cases.

Best of luck! :)
 
I think there is a confusion over "director" and "shareholder" - you can be one or the other or even both, but they are two completely different things, and not necessarily related.
 
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