Most micro and small business owners should seriously consider tying their key employees into their business by giving them shares or allowing them to purchase them at full or discounted value. The title to this blog is (deliberately) a little bit misleading because we are not talking about giving away control of your business by using this strategy – setting aside 5-10% of share capital for your key employees should be more than enough.

By getting the additional, longer-term commitment of key employees by offering them shares, this should enable you to considerably develop your business profitability and value – which will more than pay for the shares that you give away.

You need to be careful which employees you offer this incentive to and you should have proper agreements in place covering the treatment of any gifted shares should they chose to leave your employment in the future – but these are just sensible precautions that shouldn't put you off having a scheme in the first place.

There are numerous ways that you can set up a proper share incentive scheme for your business, many of which are "Government Approved" and come with added tax advantages.. It is Government policy at the moment to actively encourage such schemes by offering these tax benefits.

But the tax benefits are just a nice little "add on". For the right business with the right employees there should be compelling commercial reasons to introduce such a scheme.

Any half-decent accountant will be able to advise you on the technicalities of the different schemes currently available and the differences between them. I have got a useful little summary report (2 pages) that also explains these if anyone is interested (just email me to [email protected] and I'll be happy to send you a copy).

But primarily you shouldn't be considering an employee share scheme from a tax point of view – there are probably sound commerial reasons why most businesses should introduce one of these as a matter of priority.