What Ltd company structure?
What Ltd company structure?
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dan_87

Original Poster:

150 posts

209 months

Thursday 17th February 2022
quotequote all
I'd like to understand the best Ltd company structure for the below- I will of course speak to an Accountant.

I am investing into a new business with 2 others. We will all be Directors/Shareholders of equal weighting. We are in the process of acquiring our first 'business' and will grow through further acquisitions. Each 'business' will be trading from a physical leasehold. The go to for those in the same industry comprise company name ltd, with several companies beneath say, company name (location) ltd.

I would like my profits to remain within a ltd company, to drive a commercial property portfolio. For example, in the short term, turnover will be circa £1m. Net profit circa £100k.

I want to keep as simple as possible, however unsure how?

Thanks,

Dan

StevieBee

14,287 posts

271 months

Thursday 17th February 2022
quotequote all
Doesn't matter what structure you apply - key is a robust shareholder agreement. I'd say 80% of the woes you find popping up here is as a direct result of a lack of one.

Beyond that, you need to think about this:

dan_87 said:
equal weighting
I sounds nice and cosy and you think this is the most harmonious dispersal of responsibility which for the most part, it is...up until it isn't. At this point, you will find a light inequality far more beneficial for the good of the company.

If you can't work out how to address that, I refer the honourable gentleman to the answer I gave a few sentences ago.

Caveat: all this based upon personal experience. Other experiences may apply.



BorkBorkBork

731 posts

67 months

Friday 18th February 2022
quotequote all
You might want to consider a holding company with trading subsidiaries. Getting the structure right from day one will save time, money and headaches further down the line. Especially if you plan on amassing any sizeable assets, such as cash or property.

But as always, talk to a decent accountant as well as tax specialists. They’ll talk you through a number of options, and outline the pro/cons of each scenario.

Smiler.

11,752 posts

246 months

Friday 18th February 2022
quotequote all
StevieBee said:
Doesn't matter what structure you apply - key is a robust shareholder agreement. (1) I'd say 80% of the woes you find popping up here is as a direct result of a lack of one.

Beyond that, you need to think about this:

dan_87 said:
equal weighting
I sounds nice and cosy and you think this is the most harmonious dispersal of responsibility which for the most part, it is...up until it isn't. At this point, you will find a light inequality far more beneficial for the good of the company.

If you can't work out how to address that, I refer the honourable gentleman to the answer I gave a few sentences ago.

Caveat: all this based upon personal experience. Other experiences may apply. (2)
(1) This. In spades.

(2) Yes, bitter.

De Tomaso

42 posts

44 months

Friday 18th February 2022
quotequote all
Dan,

Keep one extra share for yourself so in the event of a split decision, you have the final say.

Good luck with the business.

I'm not an accountant - even though my brother is an about to retire FCA.

LooneyTunes

8,320 posts

174 months

Friday 18th February 2022
quotequote all
De Tomaso said:
Keep one extra share for yourself so in the event of a split decision, you have the final say.
And when they all want that? Besides which, there are three of them…

The shareholder agreement advice given so far is good, but the OP also needs to consider the nature of the business and extent to which it makes sense to keep the operating businesses as distinct, easy to identify, entities (which it may or may not do).

Dan is also not clear about what he means by “equal weighting”. For example, does this mean putting in the same amount of time/money/both at the start and having the desire/ability to equally scale their involvement. The leasehold angle could also bring complications around strength of covenant, guarantees etc, all of which might change the picture materially for one or more parties involved.

Then there’s there’s the tricky issue of future involvement. Rarely is it good to have parties able to just walk off at will, go passive, and allow others to carry the future burden… again one that can be dealt through a combination of structure and shareholder agreement.

Fwiw, i wouldn’t set up something along the lines of what Dan is proposing without a clear, written, overview outlining the business model, funding strategy, exit options, etc to make sure all three are in the same place with this forming the basis for developing the SA *and* recognising that things change over time. For example, he should anticipate the different implications of debt vs equity and the fact that peoples circumstances and goals change. For this reason I would almost certainly:
1) look at a holding company structure to allow distinct businesses (the “business” he refers to and the future investment side) to be more clearly delineated (if it makes them more easily divested)
2) consider the merits of a multi-class share structure at holdco level
3) *and* give some serious thought to how people will be compensated for their involvement (any split of shares is just part of the story!)

Al Gorithum

4,641 posts

224 months

Friday 18th February 2022
quotequote all
Agree with the point about a decent shareholders agreement, which in my preference would also include a clause on dividends distribution (which can often be a point of contention).

I normally silo companies to avoid the issue of consolidated accounts etc.

Good luck with it!