New Business - best format?
Discussion
Two friends and i are planning to start a company running events. The idea is that we will start with one event per year and then expand. We all work full time in other jobs so this is a part time thing to top up the coffers if you like. The eventual idea would be to expand it to running a few events a year before selling the business on.
The events will not be that big, for example the event we are starting with will have a turnover of around £15k to £20k.
I'm looking for advice as to what the best business form might be? It's been suggested that a full limited company would be cost ineffective with a turnover like this, so i was thinking that perhaps a limited liability partnership might be the way to go?
Advice very much appreciated!
The events will not be that big, for example the event we are starting with will have a turnover of around £15k to £20k.
I'm looking for advice as to what the best business form might be? It's been suggested that a full limited company would be cost ineffective with a turnover like this, so i was thinking that perhaps a limited liability partnership might be the way to go?
Advice very much appreciated!
Or there's Partnership. However these have a history of conflict as two people who are friends to start with can fall out big time and they are jointly and severally liable for any debts. In other words, if yuor partner does a runner and you find out he's ploughed you £550K in debt, you get to pick up the pieces...
Heres a few things to think about which you may or may not have considered:
Firstly, it strikes me that to have the confidence to start this kind of thing that one or all of you have some experience in event planning. I am guessing that one or all of you might work for a related company which is where you got your experience. If this is the case they may object to you 'moonlighting' in the same area whilst also working for them. check your employment contracts.
Secondly, I would check the reasons *why* each of you are going into this. If you are looking seriously at the prospect that you only want to run the company as a vehicle to set up something to sell, I would say that this may not be a feasible possibility from what you have mentioned. If each of you are working part time, your company will only have three employees. If you are looking at a limited number of events over say the next few years, and with only you three as employees, I would suggest the value of your company would be very limited. When you sell, you are basically taking all of your assets with you - yourselves!
To be frank, I wouldnt even worry about that for now. What is much more important is your legal framework, now, and getting that right. I would say that if you are looking to do this seriously, a Ltd Co may be the right way to go. That way you can keep money in the company until there is money made, and until then you don't have to start messing around with changes in your own personal taxation until then. Secondly, you can all withdraw dividends from profits which will mean that no doubt you will end up with more in your pocket with less tax paid.
Although this seems downheartening, every partnership that ended in fisticuffs, legal action and lifelong friends never speaking started on good terms. The ones that ended up like that never thought about their 'exit policies' before they incorporated. In a partnership there is a 50/50 chance that your partner will want to stop before you. If you have two partners, obviously this chance increases. With a complex situation with partners putting in different investments, having different workloads, and different amounts that they think the company is worth, you probably wont get an easy amicable agreement, in fact probably exactly the opposite.
However, if you make the rules clear from the start, someone can leave on good terms, as there is nothing more to discuss - the rules have been set. You can do this in a mathematical way, but even those figures can be open to interpretation. Better are things like a 'showdown'. When things go bad, each partner delivers a closed bid to buy out the other to your solicitor. Whoever offers most get the right to buy out the other.
Seriously, sorting this now will save you 100 times the bother later.
Firstly, it strikes me that to have the confidence to start this kind of thing that one or all of you have some experience in event planning. I am guessing that one or all of you might work for a related company which is where you got your experience. If this is the case they may object to you 'moonlighting' in the same area whilst also working for them. check your employment contracts.
Secondly, I would check the reasons *why* each of you are going into this. If you are looking seriously at the prospect that you only want to run the company as a vehicle to set up something to sell, I would say that this may not be a feasible possibility from what you have mentioned. If each of you are working part time, your company will only have three employees. If you are looking at a limited number of events over say the next few years, and with only you three as employees, I would suggest the value of your company would be very limited. When you sell, you are basically taking all of your assets with you - yourselves!
To be frank, I wouldnt even worry about that for now. What is much more important is your legal framework, now, and getting that right. I would say that if you are looking to do this seriously, a Ltd Co may be the right way to go. That way you can keep money in the company until there is money made, and until then you don't have to start messing around with changes in your own personal taxation until then. Secondly, you can all withdraw dividends from profits which will mean that no doubt you will end up with more in your pocket with less tax paid.
Although this seems downheartening, every partnership that ended in fisticuffs, legal action and lifelong friends never speaking started on good terms. The ones that ended up like that never thought about their 'exit policies' before they incorporated. In a partnership there is a 50/50 chance that your partner will want to stop before you. If you have two partners, obviously this chance increases. With a complex situation with partners putting in different investments, having different workloads, and different amounts that they think the company is worth, you probably wont get an easy amicable agreement, in fact probably exactly the opposite.
However, if you make the rules clear from the start, someone can leave on good terms, as there is nothing more to discuss - the rules have been set. You can do this in a mathematical way, but even those figures can be open to interpretation. Better are things like a 'showdown'. When things go bad, each partner delivers a closed bid to buy out the other to your solicitor. Whoever offers most get the right to buy out the other.
Seriously, sorting this now will save you 100 times the bother later.
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