# PDR 007: Make business wealth in FI planning tax, access, and time aware

- HTML version: https://robbiepalmer.me/projects/personal-finance-app/pdrs/007-business-wealth-fi-readiness
- Project: Personal Finance App
- Status: Accepted
- Opened: 2026-11-06
- Decided: 2026-11-06

## Context

A business interest can increase household net worth without funding household
spending today. Company cash may be needed for Corporation Tax, VAT, payroll,
creditors, or continued operation. Moving value to the household may require a
salary, dividend, pension contribution, sale, wind-down, or another supported
route, each with different timing and tax treatment.

Asset Tracker already separates net worth from capital that can fund retirement
spending. Owned businesses need the same discipline. Treating the value of a
company as immediately available would overstate financial independence.
Excluding every business interest would understate the options available to an
owner who can extract surplus, sell the business, or fund a pension over time.

## Decision

Do not include a business interest in FI-eligible capital merely because it is
included in household net worth. Count business value only through an explicit
plan that states how and when value becomes available to the household.

Support these plan treatments as their calculation rules become available:

* continue trading and extract supported surplus through salary, dividends, or
  employer pension contributions;
* wind down the company and extract the supported net proceeds;
* sell the ownership interest using a dated valuation or sale assumption; or
* exclude the business from the FI plan while retaining it in net worth.

An extraction plan starts with company cash and distributable amounts that the
selected route can legally use. It deducts company liabilities, accrued taxes,
user-defined operating reserves, transaction costs, and personal tax. It records
the date on which the resulting household cash or pension value becomes
available. Employer pension contributions enter the pension access path rather
than current household cash.

A sale or wind-down plan must not reuse ordinary dividend assumptions when the
relevant capital, liquidation, relief, and transaction-cost rules are not
implemented. Unsupported routes remain visible and contribute no FI-eligible
capital until the user selects a supported treatment.

Show at least these distinct measures:

* total economic net worth, including the selected value of owned businesses;
* household capital available for spending on the valuation date;
* future capital with its access date, including pensions and planned business
  extraction; and
* FI-eligible capital under the selected plan, after supported tax and costs.

The FI view shows the business treatment, gross value, deductions, net value,
availability date, ownership share, valuation source, and unsupported
assumptions. Users can compare plans without changing the recorded financial
facts or the standalone company accounts.

## Consequences

Two households with the same total net worth may have different FI status. A
household with accessible investments can fund spending sooner than one whose
wealth sits in a trading company, even when their headline net worth matches.

The calculation needs to connect business valuation, company cash and reserves,
limited-company extraction scenarios, pension access, and household spending
goals. Forecasts must carry the company boundary across periods rather than
convert retained profits into personal cash at the first opportunity.

The interface needs a concise default and enough detail to explain why business
wealth is excluded, deferred, or reduced. Unknown tax or legal treatment must
lower confidence or block the affected plan instead of producing a precise but
unsupported FI date.

## Alternatives considered

### Count the full business valuation as available capital

This was rejected because a valuation is not cash and may depend on continued
trading. It ignores extraction tax, liabilities, operating needs, sale timing,
and whether a buyer exists.

### Exclude business wealth from every FI calculation

This was rejected because owners can often extract surplus, contribute to a
pension, or sell an interest. The product should model those options when it can
support them rather than assume the value is permanently inaccessible.

### Apply one fixed liquidity discount

This was rejected because a generic haircut cannot represent tax, legal access,
operating reserves, or timing. An explicit plan is more work, but it explains the
result and can identify unsupported states.

## Related records

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

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