What is a Family Investment Company (FIC)?
A FIC is usually an unlimited private company designed to hold and manage family investments in a tax-efficient manner. Shareholders are chiefly made up of family members, who can benefit from favourable tax treatment on income and capital gains while also retaining control of assets and how value can be distributed from those across family members.
Founders will typically transfer assets into a FIC in exchange for shares, which will centralise management of family investments, and seek to protect and grow wealth over time. Different classes of shares will often be created and allocated to various family members to provide flexibility in distributing income and capital.
Why use a FIC?
- Tax Efficiency: FICs can offer various tax advantages compared to personal investments and assets held under trust. Corporation tax will be paid on the profits of a FIC, which will often be lower than family members’ personal income tax rates (or capital gains tax rates, where assets are disposed of by the FIC and a gain is made). As inheritance tax liabilities can be mitigated by creating share classes with different rights as to ownership and control, FICs can also play an important role in effective estate planning. By structuring family wealth through a FIC, families can reduce their overall tax burden, making them ideal for preserving and growing large pools of assets.
- Asset Control: FICs allow families to retain direct control over assets. Founding family members (usually the parents) will often maintain control over the company and its assets (in the form of voting shares), while gradually passing ownership (in the form of non-voting shares) to younger generations. Traditionally, trusts have been used where parents want to transfer wealth to their children without relinquishing control over the assets. However, given the costs involved in trust administration, FICs can offer families a viable alternative.
- Separate Legal Identity: As companies benefit from separate legal personality, FICs can provide effective wealth protection by holding family assets in a company structure. Not only will this mean that family members’ liability for the debts of the FIC is limited to the amount of their investment, but also that assets will benefit from a degree of insulation against personal creditors.
How can we help you?
Whether you are considering if a FIC is the right structure for your family’s financial goals, need help setting one up, or are seeking one-off advice, our expert team is able to guide you through the process and provide tailored advice on all aspects of FICs, ensuring your family’s assets are protected and can grow for future generations.
