Setting up a family investment company, designed around your family.

Design first, then documents, then money, then gifts. The share classes, any trust and the funding plan are agreed before the company is formed. The company is registered, the articles and any loan agreement are signed, and the parents fund it. Shares are gifted or issued only after that. Gifting shares before the funding and documents are in place can create avoidable tax, so the order of the steps is part of the advice.

At a minimum: articles of association setting out the share classes and their rights, a record of the shares issued, and a loan agreement if the parents are lending. Most families also have a shareholders' agreement, board minutes, and a trust deed if a trust is a shareholder. Together they say who controls the company, who receives dividends, what happens if a shareholder divorces, dies or becomes bankrupt, and how money comes back out.

Almost anyone: parents, grandparents, adult children, a spouse or civil partner, and trustees of a family trust. Minor children can hold shares, though the tax rules on gifts from a parent need care. A private company needs at least one director who is a real person, and directors owe duties to the company under company law. Many families appoint the parents and, later, a trusted adult child.

Usually the parents. They subscribe for the first shares, typically the voting or freezer class, and lend the company most of the money. Growth shares for the children and any trust are then issued or gifted as the plan sets out, ideally while the company's value is low. Having the founders hold the first shares keeps control with them and gives a clean starting point for valuing every later issue and gift.

No. There is no special tax regime for family investment companies and no approval procedure. The company is formed at Companies House, registers for corporation tax and is taxed under the ordinary company rules. That does not mean HMRC takes no interest: the settlements rules, the gift with reservation rules and the tax treatment of any assets moved in all apply, which is why the design and documents matter.

Sometimes, but we usually start from a new company. An existing company has a history, its own shareholders, reserves and possibly trading activity, and changing its share rights can be treated as a transfer of value for inheritance tax and a value shift for capital gains tax. Converting existing shares into freezer and growth classes is possible with care and advice. A fresh company with the right classes from day one is normally cleaner.

You can form a company yourself, but a pack cannot design the structure for your family. The share classes, who holds the votes, how the children and any trust are treated, and how the company is funded all depend on your wishes and circumstances. Poorly drafted rights can undermine the tax result or the protection you wanted. We start every company from a blank piece of paper for that reason.

The articles set out the share classes and the rights of each: votes, dividends and capital. They carry the restrictions that help keep shares in the family, such as pre-emption rights, a power to refuse a transfer and compulsory transfer on divorce, bankruptcy or death, and they say how directors are appointed and dividends declared. They are public at Companies House, so private matters usually go in a shareholders' agreement.

Yes. A family investment company is not limited to parents and children. The shares can be held by siblings, nieces and nephews, a partner or friends, or by a trust for a wider class of beneficiaries. The parental settlements rule on gifts to minor children is not relevant, but gifts to other people are still potentially exempt transfers, so the seven-year rule matters. We design around the people you want to benefit.

Usually yes, if the articles allow for it and the right approvals are given. New classes can be created and new shares issued, often as growth shares valued when issued. Altering the rights of existing shares is different: in a close company it can count as a disposition for inheritance tax and a value shift for capital gains tax. We plan for future family members at the outset to avoid awkward changes later.

A gift of shares for no consideration does not usually attract stamp duty, and the transfer form is normally not sent to HMRC, though it should record nil consideration with the right certificate. If debt is assumed or released as part of the transfer, that counts as consideration. Sales of shares are charged at 0.5%. Gifts still have inheritance tax and capital gains tax consequences, which are separate from stamp duty.

Yes, partly. A limited company's directors and people with significant control, broadly those with more than 25% of the shares or votes or real control, are recorded at Companies House, and its accounts are filed publicly. Where a trust meets a control condition, its trustees are recorded. An unlimited company meeting certain conditions need not file accounts, which is why some families choose one. We discuss the privacy trade-offs before the company is formed.

It helps to have a plan, though not every account must be open on day one. The company needs a bank account and, usually, an investment platform or manager, and those providers will ask for the company's documents and details of its directors and controllers. Opening them takes time, so we suggest settling the investment approach while the structure is being designed. The investments themselves are for the family and its investment adviser; we advise on the tax.

Usually quoted shares, funds, bonds, cash and sometimes unquoted investments or property. Each is taxed differently inside a company: most dividends received are exempt from corporation tax, while interest, rent and gains are taxed. Some funds, such as bond-heavy funds and non-reporting offshore funds, have special rules. The investment strategy is for the family and its investment adviser, but the tax treatment of what you choose should shape the choice.

Yes, and many do. Both can lend, hold voting shares and act as directors. Gifts between spouses and civil partners living together are generally no gain, no loss for capital gains tax, and shares held by a spouse are aggregated with your own for inheritance tax valuation, which can affect the value of freezer shares. How each spouse is involved is part of the design.

Often, yes. An existing discretionary trust can subscribe for growth shares in a new family investment company, or the trust can be a shareholder alongside the family from the start. Whether the existing trust is suitable depends on who can benefit, whether the settlor is excluded, and its tax position. If it is not suitable, a new trust can be created. This is the kind of combination our blended FIC structure is designed around.

Four stand out. The settlements rules, which can tax dividends on the parent when shares are gifted to a minor child. The gift with reservation rules, which can leave gifted shares in the donor's estate if they keep a benefit. The close investment-holding company rules, which fix the corporation tax rate. And, where property or a trust is involved, capital gains tax, stamp duty land tax and the relevant property regime.

The common ones are gifting shares before the funding and documents are right, using a template that does not fit the family, forgetting the position of a child under 18, moving property in without checking the capital gains tax and stamp duty land tax, and keeping a benefit from gifted shares. Another is leaving the company with no plan for how money comes back out. Early advice avoids most of these.

You are ready when you have a sum you will not need for living costs, a view on who should benefit and when, and a rough idea of how much control and access you want. You do not need the detail worked out. A free first call is the place to test whether a family investment company is worth it for you and what the sensible alternatives are.

We set up family investment companies from around £1m to £50m. At the smaller end the costs have to be weighed against the benefit; at the larger end more complex designs, with trusts, several share classes and funding from a holding company or property, are common. If you are unsure whether your sums justify one, a free call will give you an honest view.

The company opens its bank and investment accounts, the parents advance the loan under the signed agreement, and the shares are issued or gifted in the planned order. The first board meeting is minuted, the statutory registers are kept, and the company registers for corporation tax. Directors and people with significant control complete identity verification at Companies House. It is also sensible to diarise the first annual review.