The management company
Is this for me?
Which manager has not at some time asked himself this question?
The question is inevitable, as our legal and fiscal environment makes it necessary in many cases. These include pension plans, LBO/MBO operations and property investments.
It is worth taking a little time to outline the many benefits of a management company.
However the creation of such a company is not the best solution in every case; a case-by-case analysis remains indispensable.
Furthermore, the structure’s management must be optimised, to ensure it is not rendered useless by taking up too much time and entailing pointless costs.
With thorough experience in the field, we are available for examining the advisability of a management company in your case and to quantify the benefits and carry out simulations.
Savings in tax and national insurance contributions
The main savings lie in the difference between the rates of personal income tax (50%) and that of companies (33.99%).
The personal income tax - and not the company tax - is increased with the additional centimes to local authorities that can reach 8.5%.
Companies, for their part, benefit from a reduction of the taxable base through the deduction of the notional interests.
Lastly, all profits, which are not paid to the director as remunerations, avoid INASTI social security payments (an average saving of 20%).
Immense flexibility
For companies belonging to several directors, it is not rare that the directors invoice their respective shares and allocate them according to their priorities.
From experience, we know how diverse and sometimes different directors’ priorities can be; some favour security (invalidity insurance or guaranteed revenues) and pensions (maximal group insurance) whereas others prepare for their pension through investment. Some concentrate on the present, by developing business through representation activities; they therefore offer themselves large cars and the latest technological accessories… The best way to remunerate a director depends on a multitude of personal factors such as their age or family composition. Creating a management company enables sterile questions and discussions about, for example, representation expenses, the fiscal cost of a car, the price of a mobile phone, communications, pension premiums, insurances…
It is possible to change the objectives, for example by catching up at the end of a career on years during which extra-legal pensions had not been paid. It is also possible to modify the compensation so as to increase the extra-legal pension. The choice between compensation, percentages of profit, dividends, options, fringe benefits (car, home, home staff, heating, electricity…) underlines the potential flexibility of a management company.
A way to invest
As the profits of the company are subject to lower charges, the management company can call on more ways to invest and finance itself.
It is an interesting investment vehicle: for example, a property investment enables a certain number of expenses to be reduced, including the purchase costs, the amortization of the property (capital) and interest on the loan. However the type of property, its condition (renovation, transformation,… ), its use (residential, commercial, industrial…), the way it is acquired (full ownership, usufruct, long lease, ….) are parameters that must be carefully studied to avoid carrying out an operation that is fiscally very unfavourable in the medium term.
One must be particularly careful – even hesitant – about the purchase of an apartment on the coast or that of the family home.
How many entrepreneurs have been able, using a management company, to buy the company in which they were working? They have also been able to deduct interest on the loans and avoided new taxes on the sums destined to reimburse the loan. Without a system of this nature, the purchase would have simply been impossible!
Protection against professional risks
A management company is one way of preserving the fruit of one’s work and one’s investments in the case of a bankruptcy.
Precious aid for one’s old days: sale, retirement, inheritance and donations
Currently, everyone is aware that it is easy and not expensive to transfer company shares, irrespective of what the estate consists of.
The choice of a company’s legal status enables an enterprise to be passed on while remaining in charge.
In some cases, the management company is a precious aid in transferring the enterprise, for example for ensuring the continuation of business after retirement or for balancing accounts that the new owner might not want - or be able – to take over.
Furthermore, a management company can invoice services at a higher rate than the limit authorised for those on retirement, who can then recover the fruit of their work, notably through a distribution of dividends or by winding up the company. Former managers can therefore retire without harming their professional circle through an abrupt departure. Pensioners can also undertake new activities or develop their hobbies without compromising their pension.
Conclusions
To sum up, the creation of a management company enables one to tailor one’s business throughout a career and to change the choices without being penalised. This perfectly suits company directors whose career is exposed to numerous risks that constantly fluctuate.