Dividing business between family members

npswf14

Hello all
I am currently a sole trader and have two employees, one of which is my nephew.
We've been trading successfully for 7 years and business is good.
My nephew is ambitious and wants to be more involved in the running of the business.
I am intending to go Ltd very shortly and we have an accountant to take care of the transition.
my question is, what are people's thoughts on the pros and cons of making my nephew a director? I want to remain in ultimate control, but I want him to step up and take more responsibility.

Thanks for your time!

Savvy_Sue

If he's been a good employee up to now, and with a good relationship with other employees, then the cons are reduced, but still there: is there going to be an element of resentment, that he's got where he has because of who he is not how good he is. Is that likely to be an issue?

definitely get proper advice, ie paid for ... Do NOT make equal shares, you want to be able to over-rule him ...

Wywth

npswf14 wrote: »

Hello all
I am currently a sole trader and have two employees, one of which is my nephew.
We've been trading successfully for 7 years and business is good.
My nephew is ambitious and wants to be more involved in the running of the business.
I am intending to go Ltd very shortly and we have an accountant to take care of the transition.
my question is, what are people's thoughts on the pros and cons of making my nephew a director? I want to remain in ultimate control, but I want him to step up and take more responsibility.

Thanks for your time!

How will the remaining employee take it? i.e. you promoting your own blood above that other employee?

Mistral001

By taking your nephew on as an employee you have already made the decision to bring family members into your business. If the decision was taken as a good idea at the time rather than a deliberate decision to make the business into a family business then think very carefully about whether you want to continue to go down the road of making the buusiness into a family one.

The nephew is in a fairly previlaged position within the firm at the minute as he is a family member. The other employer should realise that and treat him as such, but resentment can be there as Savy_Sue has said. Many a person has left a firm because of problems with family members being treated too favorably Also many people will not join a firm which has family members so you might not get the best staff. (I once turned down an offer of a job because the boss's son was in the business)

npswf14

Thanks for all your replies. My Nephew has worked with me for 6 years and has helped to grow the business. So my plans are to recognise that and bring him formally into the business as a director.
The other employee has only been with us a year.

pelirocco

Savvy_Sue wrote: »

If he's been a good employee up to now, and with a good relationship with other employees, then the cons are reduced, but still there: is there going to be an element of resentment, that he's got where he has because of who he is not how good he is. Is that likely to be an issue?

definitely get proper advice, ie paid for ... Do NOT make equal shares, you want to be able to over-rule him ...

A director doesn't have to be a shareholder

Savvy_Sue

pelirocco wrote: »

A director doesn't have to be a shareholder

No, but my point remains: it doesn't sound as if the OP wants the nephew to have an equal 'vote', at least not yet, and it's the kind of situation which needs proper advice to avoid the potential costs of a very nasty mess in the future.

npswf14

Exactly. I still want to remain in control, but want to involve my Nephew in the running of the business. My ultimate aim is to pass the the business onto him, so I can take a back seat and move on to new things.
The other aspect I'm unsure of is what arrangements would be best regarding taking dividends?
I'm due to sit down with my accountant in the very near future, but I would like to cast around for others thoughts beforehand!

Thanks again

Mojisola

npswf14 wrote: »

My nephew is ambitious and wants to be more involved in the running of the business.

npswf14 wrote: »

Exactly. I still want to remain in control, but want to involve my Nephew in the running of the business.

My ultimate aim is to pass the the business onto him, so I can take a back seat and move on to new things.

How ambitious? In a good way or a "knowing better than the boss" way?

The answers to those questions would affect how much control he was given.

npswf14

Well that's a difficult one! Ambitious in a good way but there also an element of the twenty something " I know everything" to him ( he's 23, I'm 44)

Savvy_Sue

I can't help with the dividends question, but one thing you need to do, IMO sooner rather than later, is make a will! I know you're still young, but it could get VERY messy for the company if you died without doing so. Again, this is something to take good legal advice on.