Singing Pig

Hi,

Can anyone please help with the following?

My business partner and I have set up a joint ltd compnay. The new company is owned 50/50 by our separate established ltd companies. To extract dividends out of our new company can they be paid directly to our personal bank accounts as we are Directors or do they need to be paid to our ltd companies as they own the new company?

I hope that mankes sense!

Thanks,

Craig.

If I follow you correctly, by saying that this joint company is owned by separate limited companies, then whatever the shareholding is, it is divided equally between the two separate established limited companies.

It is only shareholders that can benefit from any dividend. Directors cannot benefit nor be paid any dividend unless they happen to be shareholders also. The dividend will need to be documented, so ideally a board meeting of the directors of the joint company should be held and a resolution passed on the amount per share, and when it is to be paid. This should be minuted in writing and a record kept. The amount of the dividend is then paid to the shareholders as per the meeting.

The good thing is that the dividends will pass to the two bodies corporate intact without having to bother with tax credits.

It then forms part of the taxable profits of the two separate companies, and dividends then can be made from these profits.

Think about the dates of dividends, as for the receiving companies it can make a difference when tax is actually accounted for to HMRC.  

 

Only shareholders are can receive dividends, and only if there are sufficient distributable reserves.

If you pay dividends straight to your own account, that's incorrect, as you're not the shareholders of this company.  Also, with the funds held in your sub-company, you then have the opportunity to spread this income between the shareholders in the established company i.e. wives/lovers.  Going straight to your personal account would lose this advantage