Trading through a 'Company' structure - Tax obligation

[Investor]

Yep, still sorting through the legalities of setting it up, but it would be me making all the investment decisions. It won't just be shares I plan to have some in Harmoney, in some snowball effect stuff etc

It came about as i now make more income off investing than my 9-5, alot my friends are aware of it but don't have the time / effort to get started in investing, nor the patience for the admin. So this idea came about to help them out, to do more of what i like doing. Not taking any fees either.

Nothing finalised yet. still need to sort out how to protect both parties.

You should find out more about the tax side of things before even considering this. You may want to seek paid professional advice also before going ahead. This looks like a potential disaster at face value, there is a reason why you don't mix business and pleasure and having the ability to cash out at any time doesn't make sense with the types of investments you will be making (Harmoney, Shares).

[alistar_mid]

You should find out more about the tax side of things before even considering this. You may want to seek paid professional advice also before going ahead. This looks like a potential disaster at face value, there is a reason why you don't mix business and pleasure and having the ability to cash out at any time doesn't make sense with the types of investments you will be making (Harmoney, Shares).

lol, there will be a unit price which will be comprised off the value of the shares, cash, harmoney, private equity. Everything except the private equity has an up to the minute value, and I have already talked to snowball effect people about this, they updated every 3 months.

When I say my investors can cash out at any time, I don't mean this would be implemented by me selling off investments for them to get their cash out lol. thats amatuer as. I mean I would just buy their share holding. This whole thing might be only $300k max. I have multiples of that in liquidity. If all my investors sold out, I would just take over the whole thing - I already invest in all this myself

Already met with the lawyers, the accountants. I wouldn't be doing this if I wasn't confident in my ability or experience to pull it off. Most of the logistics etc are allready sorted. Just need to lock down the definition of what constitutes trading, and what form / level of legal agreement I need to provide for my investors when they sign up.

Still not 100%, if i don't think i can get it to work, then I won't do it.

[stoploss]

lol, there will be a unit price which will be comprised off the value of the shares, cash, harmoney, private equity. Everything except the private equity has an up to the minute value, and I have already talked to snowball effect people about this, they updated every 3 months.

When I say my investors can cash out at any time, I don't mean this would be implemented by me selling off investments for them to get their cash out lol. thats amatuer as. I mean I would just buy their share holding. This whole thing might be only $300k max. I have multiples of that in liquidity. If all my investors sold out, I would just take over the whole thing - I already invest in all this myself

Already met with the lawyers, the accountants. I wouldn't be doing this if I wasn't confident in my ability or experience to pull it off. Most of the logistics etc are allready sorted. Just need to lock down the definition of what constitutes trading, and what form / level of legal agreement I need to provide for my investors when they sign up.

Still not 100%, if i don't think i can get it to work, then I won't do it.

So what price are you going to buy someone out in the example of GFC where "assets" are not able to be valued , or shares were suspended ....
You will have your price and the seller another ....hence a lost "friend "
If you have multiples of this $$ why bother with the possibility of losing some good friends. Just point them in the direction of a stable managed fund imo.

Cheers

S/L

[alistar_mid]

So what price are you going to buy someone out in the example of GFC where "assets" are not able to be valued , or shares were suspended ....
You will have your price and the seller another ....hence a lost "friend "
If you have multiples of this $$ why bother with the possibility of losing some good friends. Just point them in the direction of a stable managed fund imo.

Cheers

S/L

part of it is I like doing this stuff - more than my day job, and see this as a way of getting (somewhat) "formal" experience.
My friends are all smart people and would understand the implications of a recession.

Also i don't imagine there would be a time when I could never value the fund. Sure a small portion (one stock) might go on a trading halt, but that its not going to make it so I can't define the value of the fund.

[Harvey Specter]

I have already talked to snowball effect people about this, they updated every 3 months.

Really - every three months? Not sure how they do this given there is no way to value those companies unless they are going by the last round price, in which case there are only a few that have had a follow on round (normally privately).

If the legalities prove too difficult, why not form a 'share club'. Never been part of one my self so cant really comment but it would also give the benefit of educating your friends (give a man a fish vs teach a man to fish and all that stuff). Otherwise, they free load of you in the good times and blame you in the bad times.

[alistar_mid]

Really - every three months? Not sure how they do this given there is no way to value those companies unless they are going by the last round price, in which case there are only a few that have had a follow on round (normally privately).

If the legalities prove too difficult, why not form a 'share club'. Never been part of one my self so cant really comment but it would also give the benefit of educating your friends (give a man a fish vs teach a man to fish and all that stuff). Otherwise, they free load of you in the good times and blame you in the bad times.

additionally to answering your PM, I guess they can give you a value, but i don't know if it means a whole lot, its only indicative. Businesses in their early stages could be valued in any number of ways, and you could arrive at any number of values.

I thought about a share club. But easiest way to put it is I want this to operate like a mini version of a managed fund, without the $ millions in FMA set up costs.

The first round of investors are really close friends who I trust and I assume they trust me. If there's any chance of spoiling friendships then I would be hesitant to do it. They are all smart people, they could do it themselves its not an issue of ability its more they don't have the time of the admin.

[blackcap]

additionally to answering your PM, I guess they can give you a value, but i don't know if it means a whole lot, its only indicative. Businesses in their early stages could be valued in any number of ways, and you could arrive at any number of values.

I thought about a share club. But easiest way to put it is I want this to operate like a mini version of a managed fund, without the $ millions in FMA set up costs.

The first round of investors are really close friends who I trust and I assume they trust me. If there's any chance of spoiling friendships then I would be hesitant to do it. They are all smart people, they could do it themselves its not an issue of ability its more they don't have the time of the admin.

I would seriously consider getting legal advice. If in a company structure then I presume you will be a director. That comes with a whole host of responsibilities as well. And trading with other people's money can get you quickly into strife with the SFO. I am not even sure its legal in NZ to do so without a prospectus.

[Harvey Specter]

additionally to answering your PM, I guess they can give you a value, but i don't know if it means a whole lot, its only indicative. Businesses in their early stages could be valued in any number of ways, and you could arrive at any number of values.

I thought about a share club. But easiest way to put it is I want this to operate like a mini version of a managed fund, without the $ millions in FMA set up costs.

The first round of investors are really close friends who I trust and I assume they trust me. If there's any chance of spoiling friendships then I would be hesitant to do it. They are all smart people, they could do it themselves its not an issue of ability its more they don't have the time of the admin.

have a look at what Lance did with Punakaiki then. Close friends is an exemption from the wholesale investor requirement.

[alistar_mid]

I would seriously consider getting legal advice. If in a company structure then I presume you will be a director. That comes with a whole host of responsibilities as well. And trading with other people's money can get you quickly into strife with the SFO. I am not even sure its legal in NZ to do so without a prospectus.

I will get legal advice.

wouldn't I only get in to strife with the SFO if I plan to be dodgy with my friends money?

I wouldn't be doing this if I wasn't sure of it. I have already ran it past people in the industry who are good friends / family (they are obviously unable to invest). These guys are very experienced, head of research at one of NZ's main fund managers and head of investments at another fund manager. I sat down and talked it through with both these people to see if it was even feasible. No major red flags came up. Its going to be a private fund. Not public.