Starting up new limited company
Discussion
I currently run my own limited company and have am looking to start another separate company with a business partner.
With the funding that I have, i will probably be looking at a 20% -25% share of the company.
As there will be 2 of us for this new company, is there anything that I need to be aware of? Obviously being just me in my existing company, things are very simple.
I assume that when dividends are paid out I will only receive a 20-25% share, but what about salary - how is this decided, is it just a case of an agreement between the two of us?
With the funding that I have, i will probably be looking at a 20% -25% share of the company.
As there will be 2 of us for this new company, is there anything that I need to be aware of? Obviously being just me in my existing company, things are very simple.
I assume that when dividends are paid out I will only receive a 20-25% share, but what about salary - how is this decided, is it just a case of an agreement between the two of us?
I would tread very carefully with a minority holding. How much do you trust your business partner?
I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
trickywoo said:
I would tread very carefully with a minority holding. How much do you trust your business partner?
I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
This cannot be stressed enough...but it matters not one jot how much you trust your business partner. SA may help but you also need to make certain that the Articles are appropriate for your needs and that they cover all eventualities. I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
PS. OP, are you Chuno?
Edited by VX Foxy on Monday 7th December 00:48
Double underlining Trickywoo's and Sumo69's advice.
Proper and very clear shareholder agreement. Be sure to include all the what happens if things go wrong/awry clauses...
Proper and very clear shareholder agreement. Be sure to include all the what happens if things go wrong/awry clauses...
trickywoo said:
I would tread very carefully with a minority holding. How much do you trust your business partner?
I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
I say from bitter experience that when money is involved people can be ruthless with little or no prior indication that it will be the case.
You need to be very clear, ideally in writing, about what you are expecting to get out of having a 25% interest both from an ongoing business perspective and if the company is sold / other minority holders are brought in etc.
Thanks again...
Having looked into it further, it appears that a shareholder with more than 25% share can block 'special resolutions'
At the moment, we are ready to pull the trigger on Monday on a 75/25 split with the solicitor.
Shall I try for 26/74 at the last minute, or will it make little difference as the majority shareholder is so high?
Having looked into it further, it appears that a shareholder with more than 25% share can block 'special resolutions'
At the moment, we are ready to pull the trigger on Monday on a 75/25 split with the solicitor.
Shall I try for 26/74 at the last minute, or will it make little difference as the majority shareholder is so high?
If a business makes money that money can be paid out in dividends and wages, or just dividends, or just wages. The majority shareholder makes the decisions about the wages/dividend split. He might decide to pay all the profit to himself in wages. If all the profit goes in wages there won't be any dividends.
Yes, I am putting in 25% of the money.
The solicitor is sorting the articles of association and shareholders agreement etc.
Interesting that you say 26%won't make any difference as according to a few sites it gives you more rights?
Please could you elaborate why you think it's a bad deal
I
The solicitor is sorting the articles of association and shareholders agreement etc.
Interesting that you say 26%won't make any difference as according to a few sites it gives you more rights?
Please could you elaborate why you think it's a bad deal
I
Foxy,
Interesting that you say 25% is ok, as I have just looked at the relevant legislation here;
http://www.legislation.gov.uk/ukpga/2006/46/sectio...
and it says that it requires a vote 'of not less than 75%'....
Interesting that you say 25% is ok, as I have just looked at the relevant legislation here;
http://www.legislation.gov.uk/ukpga/2006/46/sectio...
and it says that it requires a vote 'of not less than 75%'....
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