and find these things but working with your “power team” and having good inroads into raising finance, and even producing something called personal guarantee insurance may be really useful for this acquisition. You also may not have considered your future exit, structuring now can make a massive difference. 7. Not Understanding Tax Tax can be looked at in many ways, but if you just treat it as a cost, it just becomes something that should be minimised. Just as an example of how simple structural changes make a huge example see the example below: - Say Fred is buying Wilma Limited for £800k over 5 years that makes £250k per annum. - Without a holding company , Fred buys the company personally and he has the obligation to pay the £160,000 pa. in deferred payments to the Seller. - Wilma Limited makes £250,000 and pays say 25% tax so gives out a dividend to Fred of £187,500. - The dividend is taxable and gives Fred a personal tax liability of £63,281 (or more!!, could be £737,781). so he has only £124,218 after tax yet still has to pay the £160K deferred to the Seller. - With a holding company, Fred Limited buys Wilma LTD and he has the obligation to pay the £160,000 pa. deferred to the Seller as before. - Wilma Limited makes £250,000, pays say 25% tax so gives out a dividend of £187,500 to Fred Limited.
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