Buying and Selling Shares
Be Savvy About Shares
When it comes to owning shares, it is important to be aware of the advantages and disadvantages of both selling and buying. Indeed, whether you are a newly incorporated practice looking to sell to shareholders or a buyer purchasing existing shares, it can pay to seek advice from a trusted financial adviser.
The first thing to be aware of is dividend taxation and its impact on shareholders. In previous years, dividends from UK shares have presented incorporations with opportunities to reduce tax outgoings. The April 2016 changes as a result of the 2015 Autumn Statement mean that all dividend income from owning shares are now tax-free up to £5,000. Any dividend income above this allowance will be subject to the appropriate tax rate.
It is worth nothing that tax also applies during the purchase process. When a share is bought, a tax or duty of 0.5% on the transaction is usually required on the full price of the shares. Depending on whether it is completed electronically or by using a stock transfer form, a stamp duty reserve tax or stamp duty will also be required – the latter only applies if the transaction is over £1,000.
Once the stock is purchased, the owner inherits both the company's assets and liabilities, including the dental premises and any other property owned by the limited company – this could be both an advantage and disadvantage. Unfortunately, the buyer of the share does not have the power to pick preferred assets or liabilities, and will instead automatically acquire all assets and all liabilities.
One of the advantages of buying and owning stock is that shareholders can enjoy the benefits of limited liability. This means that if the business was in trouble financially, a shareholder's only loss would be the value of the shares and any loans made to the company – all personal assets are safe. What's more, if the value of the company increases, the worth of the stock increases – a win-win situation if one invests wisely.
For those looking to sell shares, it bears the advantage of raising capital for a practice without incurring debt that will have to be repaid. Alternatively, when a company is doing well and shares are in demand, it could pay to offer one's stocks to other shareholders at a profit. On the downside, selling shares means relinquishing a piece of ownership with every share sold, and with that comes the shareholder's right to request information on business decisions. While this can provide motivation to perform well, it could result in information being revealed that the main shareholder would rather have left untold.
All in all, the process of buying, selling and maintaining shares can be complicated and there is no doubt that dentists can benefit from the advice of Independent Financial Advisers such as those at money4dentists. It also wouldn't go amiss to keep informed on the most recent taxation changes and how they could affect both incorporating and shares.
For more information please call 0845 345 5060, email info@money4dentists.com or visit www.money4dentists.com