When a founder has been in the driving seat of a business for many years, it can often be difficult to relinquish control: either passing the company onto the next generation or selling up entirely to move on to another venture. But business owners also face another dilemma, particularly when selling part or all of their company. How can they ensure that the wealth they’ve created is not only preserved but grows and provides a legacy for their descendants?
The entrepreneurs we work with at Private Office from Investec Wealth & Investment all have very different aspirations and goals. Some are running lifestyle companies to support themselves, and simply want help to ensure any excess money is invested appropriately. Some are planning to exit, whether to retire or move on to something new, and therefore have a large lump of capital to invest. Others need assistance finding the appropriate tax vehicle for setting up a company (the Enterprise Investment Scheme, for example), or are simply looking at how best to structure remuneration or pensions for themselves or their family.
Being an organisation that offers multiple services – from tax planning to wealth management, from corporate finance to investment banking – allows Investec to offer a holistic set of services at every stage of the entrepreneurial journey.
Given the variety of ambitions entrepreneurs have, however, it’s difficult to define how a business founder should seek to protect and grow the wealth they’ve created. In any case, the tax rules are complex. For example, keeping part of your money invested in your company can allow you to qualify for Business Property Relief, which can exempt that investment from inheritance tax. If you decide to sell part of the business and qualify for Entrepreneurs’ Relief, however, although you will benefit from a lower rate of capital gains tax on the sale, the fact that you would be holding the proceeds as cash in your name would make it liable for inheritance tax.
As these examples perhaps show, a key concern of many entrepreneurs is the legacy they leave behind. When you’ve built something, you often want to help the next generation and the generation after that. As such, it can be a benefit to develop a long-term relationship with a wealth manager – especially one that is committed to longevity of service. It’s important to also note that long-term wealth management should never be dependent on aggressive use of tax planning vehicles. Most forms of offshore tax planning, in particular, are probably on the way out.
For some entrepreneurs, making the decision to allow an expert to look after a portion of their wealth can be difficult. Their drive is to maintain control, and the last thing they want to do is relinquish it. But this is far from universal. In fact, in our experience, the key factor is information. It is typical for a client to want the highest level of information on what we’re doing for them, backed by a strong relationship and trust.
Recent governments have shown themselves to be extremely supportive of the efforts of entrepreneurs. From the Enterprise Investment Scheme to Entrepreneurs’ Relief, business founders have probably never been more advantaged – at least when it comes to the tax reliefs on offer. But on these matters, and on many more, it is vital to obtain bespoke advice. Only then will you have the best chance to protect and grow your wealth over the long term.
Kartik Rawal, Tom Whillier
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