Business Partner Needs A Wage, I Don't

[MrSparks]

I am likely starting a business with someone I've known and worked with for a while, I already run my own business and he has always worked for someone else. I have another business to support me but he doesn't so he will need a wage as soon as the company is able to pay a wage (should be fairly soon for a very basic wage). The plan is 50/50 ownership.

How do people recommend to keep this fair if he needs a wage? I can't deny him of it, but I don't need it and I doubt we'll be able to pay out 2 x identical wages for a while. Even when we can, our plan is to reinvest as much as possible to push the company further, I don't really intend on taking any money from this company for a long while, if possible.

So how will this work if he's taking a wage and I'm not being paid anything? Is there a way to keep this fair? Could it be taken as directors loan? Should I allow the first £10,500 (personal allowance as PAYE) to go his way and not worry about it as he will be doing more work in the company than me?

He will also need a vehicle so the company will need to provide a van/insurance/servicing/fuel. I have a car so don't require any transport either.

Edited by MrSparks on Thursday 16th April 21:17

[MrSparks]

jonby said:

In most small businesses, my own included, it's very difficult to separate your different roles as a worker, an investor, a shareholder, being the provider of the initial great idea if there is one, etc

That's why there are very blurred lines between what's appropriate to take as a divi and what you take as a salary (i.e. how you decide to take your income out), especially as it's influenced by tax advantages too

But when you have a partner and you don't have identical roles, you need to start discussing those types of things

In a very large publicly listed company, those roles are much simpler to identify - senior directors are still employees who earn a renumeration package, who might also have a small shareholding. Surely you need to look at your business the same way

If your partner is going to be doing more work in the business, which you suggest is the case, it seems perfectly reasonable to me that he/she takes a wage whilst you don't, after which you both, when the time is right, take a divi. Wages are for working in the business after all, divis are for you both as owners of the business to take out profit

If you have put more money in, then it may also be appropriate for you to have a larger share of the business. If you don't want to lose the equal voting rights arrangement, then that's where 2 classes of share can come in useful

Great response thank you!!!

I may be putting some up front money in, he will be working more "hours" and as you say wages are for working, I am quite happy to accept that he should be entitled to a pre-determined minimum wage, so maybe we need to look to do a slightly different share holding and an agreement that states all the time he is working full time and I'm not, that he is entitled to a basic wage of X amount.

We will get proper advice before anything is final, I just wanted to get a few ideas/methods to think about whilst we start the planning etc.

[MrSparks]

Eric Mc said:

If you are putting in more money, in what way would that "investment" be shown i.e. in the form of additional shares or as a larger loan account?

Loan account I should imagine. We haven't fully worked out how much up front we'll need, we aren't talking a massive amount, probably only about £10,000.

Also going to look to see if they still do any form of start up loan or grant for new businesses. Whilst I don't need a wage at the minute, I haven't got stacks of cash ready to lend a new company either.