Family investment companies are private limited companies whose shareholders are family members. The structure enables parents to keep control over the assets, while growing wealth and facilitating tax-efficient succession planning. The simplest way to do this is to place cash into the company in return for shares.
What is a family limited company?
A family limited liability company (LLC) is formed by family members to conduct business in states that allow LLCs. The family LLC is a popular way to protect the assets of a family business against claims by creditors, divide income among generations, and assist in estate planning. It is a type of closed corporation.
How does a fic work?
A Family Investment Company (FIC) is a company to which the shareholders are different generations of a family. Once the company is set up the individual can transfer assets to the company or loan funds to the company. This could be cash, investments or property.
Is a family investment company a good idea?
In some cases, it’s also worth considering an outright gift. Although this offers no control or protection over your assets, it may be appropriate for those seeking a simpler way to pass their wealth onto older and responsible children. However, check if there might be inheritance and capital gain tax implications.
How much money do you need to set up a family office?
Many clients still think in terms of total net worth, and it can be a quick back-of-the-napkin measure. I usually advise clients that you should only consider a traditional family office if your total net worth is above $100 million minimum and most will need more than $250 million.
What is a family investment company fic?
A Family Investment Company (FIC) is a private company (limited or unlimited) that is controlled and run by its directors (usually the parents), with family members (usually children) owning the shares. All day-to-day control and investment decisions are vested in the directors.
What is the definition of family investment company?
Tax factsheet – Family investment company. A Family Investment Company (FIC) is a bespoke vehicle which can be used as an alternative to a family trust.
How are shares in family investment company taxed?
This will not be regarded as a transfer of value for inheritance tax (IHT) purposes and these funds can be extracted from the company at a later date tax-free. The parents also subscribe for voting shares in the FIC, which give control of the company at shareholder and board level.
Can a FIC hold shares in a subsidiary company?
Where the asset disposed of is shares in a subsidiary company, Substantial Shareholdings Exemption may be available to exempt the gain. Detailed conditions apply, but broadly the FIC would need to hold at least 10% of the company being disposed of, which would itself need to be a trading company.
How many directors should a family investment company have?
It is generally advisable for families to appoint at least two directors to manage the FIC. This will ensure continuity of the company’s affairs in the event one director passes away or is incapacitated.
