# PDR 006: Include owned businesses in household wealth without treating company cash as personal cash

- HTML version: https://robbiepalmer.me/projects/personal-finance-app/pdrs/006-owned-business-wealth
- Project: Personal Finance App
- Status: Accepted
- Opened: 2026-11-06
- Decided: 2026-11-06

## Context

Asset Tracker models people, households, businesses, accounts, and ownership as
separate concepts. A person who owns a company has an economic interest in that
company, so excluding it can materially understate their wealth. The company's
bank balance is still not the person's cash. The company owns its assets, owes
its liabilities and taxes, and may need working capital to continue trading.

Assigning each company account directly to its shareholders would erase that
boundary. Counting both the company accounts and the value of the shares would
instead count the same wealth twice. The product needs a household view that can
include a business interest while preserving a standalone company position.

## Decision

Represent an owned business as a financial entity that owns its own accounts,
assets, liabilities, obligations, and financial history. Record dated ownership
interests between people and the business. Application identity, household
membership, and authority to view the records remain separate from financial
ownership.

Represent the person's interest in the business as a derived or observed asset,
not as direct ownership of each company account. A household wealth calculation
may include the ownership-weighted value of that interest once. It must not also
add the underlying company assets to the same consolidated total.

Support these valuation treatments:

* exclude the business from the household total;
* use an adjusted net-asset value derived from tracked company assets and
  liabilities; or
* use a dated manual or externally supported valuation with its method, source,
  and observation date.

Adjusted net-asset value includes company cash and other assets, then deducts
company liabilities and accrued obligations such as unpaid Corporation Tax and
VAT. Operating reserves remain part of company equity. They affect how much can
be extracted, not whether the company owns the cash.

Do not infer goodwill or a going-concern valuation from revenue or profit alone.
If tracked records cannot support the selected method, show the business value as
unknown or unsupported rather than silently substituting company cash.

For household views, aggregate only the ownership interests held by people in
the household. Preserve the company-level view and the contribution from each
interest so the user can reconcile the consolidated result. Salary, dividends,
capital contributions, and other movements across the company boundary remain
explicit transfers. A transfer does not create wealth in the consolidated view,
although tax, fees, and payments to outside parties can change it.

## Consequences

Total household net worth can include a closely held company without claiming
that its assets are personally available. A fully owned cash-rich company can
therefore increase economic net worth while leaving household cash unchanged.

The model needs business-owned accounts, dated ownership interests, valuation
observations, company liabilities, and consolidation rules. Historical net worth
must use the valuation and ownership that applied on the date being viewed.

Users may see different values for company equity and extractable company cash.
That difference is expected. Financial-independence calculations need a separate
decision about access, tax, timing, and operating needs.

## Alternatives considered

### Exclude all private businesses from household wealth

This would preserve a clean legal boundary but materially understate the position
of users whose company is one of their largest assets.

### Assign company accounts directly to shareholders

This was rejected because shareholders own shares in the company. The company
remains the sole owner of each company account. Assigning those accounts to
shareholders would also ignore company liabilities, taxes, restrictions, and
changes in ownership.

### Count company accounts and the shareholding

This was rejected because it counts the same economic value twice. Company
records may appear in a drill-down, but consolidated household totals include the
ownership interest or the underlying value, never both.

## Related records

- Project: [Personal Finance App](https://robbiepalmer.me/projects/personal-finance-app.md)

---

Markdown index of this site: https://robbiepalmer.me/llms.txt