Going into a part time joint venture.
Discussion
Hello Everyone,
So the very long version short is this... I have a long time friend who I am going into business with on a niche website but with large potential (Think fewer visitors but with larger spending power than most). We both bring our own thing to this and we are both experienced/make a living in websites/traffic management but have different additional skillsets etc.
Predicted profit is around £40k a year as best we can accurately predict extrapolating existing stats.
There is a general agreement that everything is 50/50 but I think it would be best to put it on paper. Is there a place we can get an off the shelf paperwork agreement to reflect this?
The work/ownership is under my partners LTD company and my LTD company will get 50% of the post tax and expenses) but how would that work with me getting payed? Will I end up being double taxed on the income before I can withdraw it as a dividend from my own company?
It is early days and I am sure I am missing some things as this is my first partnership
So the very long version short is this... I have a long time friend who I am going into business with on a niche website but with large potential (Think fewer visitors but with larger spending power than most). We both bring our own thing to this and we are both experienced/make a living in websites/traffic management but have different additional skillsets etc.
Predicted profit is around £40k a year as best we can accurately predict extrapolating existing stats.
There is a general agreement that everything is 50/50 but I think it would be best to put it on paper. Is there a place we can get an off the shelf paperwork agreement to reflect this?
The work/ownership is under my partners LTD company and my LTD company will get 50% of the post tax and expenses) but how would that work with me getting payed? Will I end up being double taxed on the income before I can withdraw it as a dividend from my own company?
It is early days and I am sure I am missing some things as this is my first partnership
CG
First task for you here... Google 'why business partnerships fail'
Second.. Google 'going into business with a friend'
Have a read ... try to focus on UK articles.
My advice to you...
New venture, new company. As Doofus has said.
1. Make an apointment with your accountants. Both of you must attend... explain what you are trying to do.
2. Make an appointment with a local solicitor, Both of you must attend...explain you would like to form a partnership agreement.
In this initial phase this will not cost more than half an hour to an hour of each of these professionals time.
This is an essential investment as in the very act of doing so it brings to the surface for discussion your business plan, who gets paid, who owns what , who does what and who is in charge... and most importantly a process to deal with disagreements.
Skimping on this phase exposes you to risk and may cost a hell of a lot more that the few £00 it costs to get the right advice and structures in place.
If you prospective business partner objects... find a new partner.... or go it alone.
First task for you here... Google 'why business partnerships fail'
Second.. Google 'going into business with a friend'
Have a read ... try to focus on UK articles.
My advice to you...
New venture, new company. As Doofus has said.
1. Make an apointment with your accountants. Both of you must attend... explain what you are trying to do.
2. Make an appointment with a local solicitor, Both of you must attend...explain you would like to form a partnership agreement.
In this initial phase this will not cost more than half an hour to an hour of each of these professionals time.
This is an essential investment as in the very act of doing so it brings to the surface for discussion your business plan, who gets paid, who owns what , who does what and who is in charge... and most importantly a process to deal with disagreements.
Skimping on this phase exposes you to risk and may cost a hell of a lot more that the few £00 it costs to get the right advice and structures in place.
If you prospective business partner objects... find a new partner.... or go it alone.
AndrewCrown's suggestions are spot on.
With regards to the shareholder's agreement, something you musty determine and agree on is the end game. At what level will you exit, if indeed exit is the plan? It should also contain a list of who does what. A 50/50 split is all lovely and nice but it is almost inevitable that one of you will end up doing more work than the other. That has to be taken into account on the shareholder's agreement to avoid conflict down the line.
With regards to the shareholder's agreement, something you musty determine and agree on is the end game. At what level will you exit, if indeed exit is the plan? It should also contain a list of who does what. A 50/50 split is all lovely and nice but it is almost inevitable that one of you will end up doing more work than the other. That has to be taken into account on the shareholder's agreement to avoid conflict down the line.
Great advice here. OP, going into business with someone is much like getting married (for many). All great during the honeymoon, then the real graft starts, having to live with foibles, habits and irritations etc. Staying together is sometimes tough when views and opinions differ, or if you are just having a bad day, hence why an agreement on day 1 is paramount to ensure you both know exactly where you stand should either of you decide you are unhappy with any arrangements in the future. Best wishes for your venture being a great success.
So to update... I broached the subject with my partner in crime, sorry, business and we have agreed to go and see the accountant as a first step and form a separate company with us both as directors.
As for the legal side, we will cross that bridge shortly, at least the accountant can give us some guidance.
As for the legal side, we will cross that bridge shortly, at least the accountant can give us some guidance.
Wise to get this set up properly. One point I would add: I am no fan of 50:50 voting splits. I’ve experienced this myself and personally have found it actually makes for a less reliable partnership than even a 51:49.
In my experience, both parties generally do know who is more senior, but think it’s friendlier and more equable not to say so. The fact is, at some point, decisions will need to be made that you don’t agree on, and it makes the whole thing easier if you both know in advance who will have the casting vote.
You can have a clause in your Articles that prevents certain things happening without a larger majority that needs you both, and you can discuss what these are: eg sale of the business, firing one of you, etc. But everything else is easier if you are clear who leads when required, even if day to day things usually just work by joint consent.
Sounds to me like your friend with the existing company might be the lead here. Have a really good think about whether this whole venture will be more stable and secure if you fix this up front, rather than letting it become clear when you’re disagreeing over something later.
In my experience, both parties generally do know who is more senior, but think it’s friendlier and more equable not to say so. The fact is, at some point, decisions will need to be made that you don’t agree on, and it makes the whole thing easier if you both know in advance who will have the casting vote.
You can have a clause in your Articles that prevents certain things happening without a larger majority that needs you both, and you can discuss what these are: eg sale of the business, firing one of you, etc. But everything else is easier if you are clear who leads when required, even if day to day things usually just work by joint consent.
Sounds to me like your friend with the existing company might be the lead here. Have a really good think about whether this whole venture will be more stable and secure if you fix this up front, rather than letting it become clear when you’re disagreeing over something later.
Gassing Station | Business | Top of Page | What's New | My Stuff