Sole Trader Profit Shares

mannaroth

Hello,

I'm currently setting up a small training business. We're operating on a revenue share model.

We have contractors that take a percentage of each transaction. For example, if a customer pays £100, the contractor would receive £75 for the work they did, and the company would make £25 profit.


From the total profits, I have agreed to pay a friend 10% for the work that he's done and continues to do. We don't want to enter a formal business partnership and I want to maintain full control of the company. We're both self employed sole traders currently.

So my question is, am I able to do this? As a sole trader, am I able to offer percentages of profits to employees instead of a salary, as in this instance?

anamenottaken

mannaroth wrote: »

Hello,

I'm currently setting up a small training business. We're operating on a revenue share model.

We have contractors that take a percentage of each transaction. For example, if a customer pays £100, the contractor would receive £75 for the work they did, and the company would make £25 profit.


From the total profits, I have agreed to pay a friend 10% for the work that he's done and continues to do. We don't want to enter a formal business partnership and I want to maintain full control of the company. We're both self employed sole traders currently.

So my question is, am I able to do this? As a sole trader, am I able to offer percentages of profits to employees instead of a salary, as in this instance?

As you are both self-employed, your friend should just invoice you for the 10%. That is you tell him what the amount is - and perhaps agree with him that you will provide audited evidence. It is important to add that the work he does should itself be part of his self-employment and not in reality be as an employee.

However, you have also asked the question mentioning "employees" and "instead of salary". Employees must receive at least NMW. In addition you could increase this with a share of the profits.