In a previous article I explained the various entity types to trade in. Today I will explain the importance of the timing of the issue of shares and the impact of the moving or selling of the shares of a company.
Clients generally decide to start trading in a company with shares kept in their personal capacity. Mainly for costs as well as the potential income tax benefits of a small business corporation.
At some stage, you do want to transfer these shares to a Trust, for various reason. Most important reasons, limiting your personal risk and growth of your estate.
The problem arises when you traded for some time and increased the value of the business, and in essence the shares. Transferring the shares at later stage will trigger two complications:
My general suggestion, for a start-up, is to trade for a few months to evaluate and monitor the growth of the business. If you work closely with your accountant, and evaluate the value of the shares continuously, you will be able to transfer the share to your Family Trust at little costs, limited capital gains tax and not a massive loan account to be concerned of.