SB: Small Business Start Up Discussion

nevinrowan

Hello,

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trixxi

Hi,
I am about to go into partnership with someone in a new business.
This is supposed to be a 50/50 split partnership. The other person is putting up the start up costs, i will be doing all the legwork, getting the business up and running.

I am not very confident in the business side of things and really am wondering if this arrangement sounds fair.

I will be doing all the daily running and work and until the business brings in X amount weekly i will not get a wage.

The wages that have been set out by my business partner are low imo. the net profit would be split 50/50 and if i am earning 12,000 full time, the projected net profits would be 16,000, this would be split equally. My partner has also said that he would want his original investment repaid at a later date.

So in reality i feel this is more of loan, and is it reasonable for me to suggest that if he is expecting his investment repaid then i would want repaid for the time i was working without being paid?

Also, do you think 50/50 split is a fair amount when i would be running the business?

Any thoughts would be be really appreciated.

MDUK

trixxi wrote: »

Hi,
I am about to go into partnership with someone in a new business.
This is supposed to be a 50/50 split partnership. The other person is putting up the start up costs, i will be doing all the legwork, getting the business up and running.

I am not very confident in the business side of things and really am wondering if this arrangement sounds fair.

Are they putting up all the start up costs? are you putting any money in yourself?

trixxi wrote: »

I will be doing all the daily running and work and until the business brings in X amount weekly i will not get a wage.

Quite typical for small business, but your business plan really ought to include a wage for you from day one imho

trixxi wrote: »

The wages that have been set out by my business partner are low imo. the net profit would be split 50/50 and if i am earning 12,000 full time, the projected net profits would be 16,000, this would be split equally. My partner has also said that he would want his original investment repaid at a later date.

This depends on whether he will be taking out half the profits every year without any further input. if this is a true partnership (rather than a sleeping partner) then I would have expected him to put in man hours or experience. If he can add value through experience, contacts, market knowledge you may decide that his input will make such a difference to your business it is worth giving away half your profit. i.e. half of something is better than all of nothing.

trixxi wrote: »

So in reality i feel this is more of loan, and is it reasonable for me to suggest that if he is expecting his investment repaid then i would want repaid for the time i was working without being paid?

Also, do you think 50/50 split is a fair amount when i would be running the business?

Any thoughts would be be really appreciated.

Again if there is no input maybe a loan would be more sensible.

trixxi

MDUK...
No they are putting up the start up costs (£4,000 approx)

I agree i thought a wage should be included, but this has not been factored in by partner. Was told after we have X amount of clients then I can start taking a wage, but only in line with what we are bringing in?

No my partner will not be putting in man hours that has been made very clear, and the success of the business will be down to me. They want to know how committed i am as if i have to work for 6 months will no wage, will i still be motivated. If not their money is at risk.


I do think my business partner will input where they can, they have good business experience and ideas, will ultimately its down to me.

[Deleted User]

Hi there,
I plan to set up my own business in the new year. I am setting up an online retail business specialising in womens goth/ emo/ punk style clothing. My main selling base will be ebay but I will also have my own website, although purchases will still feed through ebay. I will also be working from home.
My plan of action is:
1. Sell second hand items to raise capital for stock.
2. Get my OH who is a web designer to design my business site and to also perform SEO to ensure people can find the site. Get hosting, domain name ect.
3. Open a basic account with a debit card as my business account (I am going to be a sole trader so this would be suitable as it will be a seperate account from my personal one).
4. Get a cheap payg mobile for my customer support line. May look into getting a non geographic number for it as a mobile number may look unprofessional.
5. Register with HMRC as a sole trader.

Already got ebay business account set up (although will want to turn it into a shop when I start trading) as well as a business email address. Also already have a couple of wholesalers lined up. Starting off small and building up as I don't want to get a start up loan, I have enough debt already without adding to it!

signs_of_recovery

My father in law's business went into liquidation a few months ago. I was employed by the business to do pretty much everything within the company except decide policy, and undertake the specialist work which was my FIL's area of expertise. The company ran a very large event once a year.
Because of a couple of very bad business decisons, the company found itself in a great deal of debt, with my FIL not willing to guarantee any further overdraft to his limited liability company, and applied for it to be struck off.
After much discussion among ourselves, and checking with the company's former accountant as to the business's viability, I have decided to form a company, and run the event, as it was run before, including my FIL in his customary role, but without the additions to the event that caused the problem in the first place.

I have an appointment to see an accountant and a small business advisor in the New Year, but in the meantime, I wondered if anyone could help with a few answers to questions that are on my mind right now.

The company was run as a limited liability company. It brought in around £120 000 a year, and spend around £80 000 a year until the decisions that put it well into the red.
It was registered for VAT.
I was it's sole "all year round" employee, but it took on around 12 people to work for one month before and one month after the event, and around 20 further people to work over the weekend of the event.
My FIL was self employed as he has other work he does, so he would bill the company for work undertaken.

My questions are:
In this situation, am I better registering as a self employed sole trader? (and if so, how do I get paid) or setting up a limited liabilty company with me as it's employee?
At what stage is it advisable to register for VAT? Right at the start, or should I wait.
Can I run an ordinary bank current account for the business, or must it be a specific business account?
If I am starting up as a limited company, how much capital do I have to put into the business?

I know that the accountant/small business advisor I am meeting at the end of January will be able to answer these questions, but it seems a long time to wait for answers, and It's on my mind a lot just now. It might also stop me obsessing quite so much about this if I could have some clear thinking about it!

Savvy_Sue

I'm not the person to answer your questions, but I may be able to help you work out some answers yourself ... and even pose a few more for you!

Although I think you'll find helpful information on the Businesslink website. They will certainly tell you how you pay yourself.

Sole trader or Limited Liability: if JUST running this event, for some reason, doesn't work out, what have you got to lose? If the answer is 'not a lot' then Sole trader would probably be fine, but if people would be able to come after your house etc if it all went belly up then the Ltd may be a better option.

Another possibility is a Partnership with your FIL, which might be advantageous if you need him to do some of the work for this event or lend his name to it. You would need a good partnership agreement for this, and by that I don't mean one pulled off the web, I mean one drawn up for your particular circumstances by a good solicitor with expertise in this area. You'll pay, but you'll pay a lot more if you don't get one and FIL lets you down (or vice versa!)

VAT: I presume you can do the sums which enable you to work out whether or not you NEED to register for VAT, ie whether this one event will take you over the limit.

Business bank account: I'd say yes, every time, because you want people to be sending you cheques etc prior to the event, I assume. Put yourself in your event attender's shoes: would you rather make out a cheque to 'Mr Fred Signs' or 'Fred Signs Events'? And something you can do now is work out what you need - cash handling facilities? card processing? lots of cheques being written each month? - and find out who offers what you need at a sensible price.

And since you will presumably still be needing a bundle of people before and after the event, read up about your responsibilities as an employer and make sure your contracts of employment are solid. I believe you'll find that even on a 2 month contract people are entitled to paid holiday pay, but you might want to insist that none is taken during the contract and pay them for it at the end.

Rolo_Tomasi

Just seen this post when responding to the one in the Tax forum.

Given the situation your father in law found himself in I would definitely give serious consideration to a Limited company. You will therefore have to have a separate company bank account in the company name. A decent online company formation costs about £80 and the initial capital paid for the shares can be as little as £1.

You will need to work out how you are going to pay yourself - does money come in all year round or is it only generated during the month of the event? If the later then you will need additional capital to keep the company running during the winter.

With regards to the VAT then I think you will have to register immediately as the business could be seen as a transfer of a going concern.

I dont think 'rolled up' holiday pay is legal any more but you will need to chack this out.

One final point to bear in mind is that if you are acquiring any assets of the old business (including goodwill or the name of the event) then the Official Receiver (if the get involved) may require you to purchase these at market value. This money could then be used to pay off the old company creditors.

Savvy_Sue

Rolo_Tomasi wrote: »

I dont think 'rolled up' holiday pay is legal any more but you will need to chack this out.

It's not, but there must be a way round it, perhaps by stating in the contract something like "by working for this 2 month period you will be entitled to X days paid holiday, however the nature of the business means that paid leave will only be granted in exceptional circumstances and X days holiday will be added to your final wages." That would be something to check.

What you don't want is to have people thinking that they can take the odd day off mid contract (or mid event!) because they're entitled to do so. It's not unusual for companies NOT to allow holiday at busy times of year, and for the OP, that busy time is the length of the contract.

That means that if someone's granny dies, you can give them a paid day's leave for the funeral from their entitlement, because it's exceptional, but if someone just fancies a long weekend you can say "no, see your contract."

pennyshahin_2

I'm thinking of designing my own place mats using a laminator-would i have to get copy right permission they would be of football teams