Company Director Position - How Should It Work?

p00hsticks

Samsonite1 wrote: »

To reiterate, I do not want to be a contractor - I can do that tomorrow if I want. This is about being a Director (I do not care about the title though) but not being the worker, just directing and generating business - my friend does not work already with just 2 resources doing the work. The 30% is the important difference.

Sorry, still not quite getting what your friend is contributing to all of this other than making you feel slightly more secure about the whole thing. As paddyrg has pointed out , if your friends company is based in the US, you'll probably need to set up a UK separate company here anyhow, so why not just go it alone?

If you're not interested in doing the work yourself, then you can just set up as per my previous post, but just have your company employ someone else to actually do the work. I suspect having multiple employees then brings in all sorts of added complications in terms of providing things required by UK law like pension plans, maternity / paternity leave, paid holidays etc that I suspect your friend over in the US is going to be unfamiliar with and leave you to sort out

p00hsticks

Samsonite1 wrote: »

The second point is the main point. I get 70% of what I can get for myself, but the dividend pot is not a one-to-one Director relationship, it is fed into by each resource.

so what you need to be asking is

Q. how many directors will the company have ? It will need a concensus at a board meeting of directors to decide when and how much dividend gets paid, and on what items other money in the pot is spent on for the company, so you need to know how much influence you are actually going to have in these decisions

Q. how many shares in the company are there, and how many will you get ? That's going to determine what your share of any dividend paid is going to be

paddyrg

Hiya, maybe I'm missing something major, but because of the company being US-based and needing a UK arm setting up, the only difference I can see between your friend's offer and going it alone is that one way you earn £30/hr from each contractor you place, the other you earn less for the same amount of work. And the hysteresis of going via the US will eat deeper into money that need not be spent. If three directors each hire 10 people then split the leftovers after costs that's not a better deal than one director keeping all of 10 people, as the overhead is significant. If you were all in the UK I'd suggest caution, but across the pond, doubly so. Two lots of law, two tax schemes, different working hours, long commutes for board meetings, etc, I just can't see the upside.

By all means do as you feel fit! Just make sure it's an informed decision. If we here aren't explaining clearly then please do find an accountant and/or business advisor who can translate and look at the fine detail in the specific case, but please do make sure the decision is informed.

Samsonite1

Thank you all for the comments. There has been lots of good questions for which I need answers.

I have been considering setting up my own company for many years, but giving up a good permanent package is a big deal when you support a family.

One big aspect of this is that I am not necessarily allowed to leave my company and start doing work for their clients. My friend's company is am approved partner so there is little risk going that route. Starting my own company runs the risk of no earnings for 6 months.

colino

I think there is a degree of fact in the offer of a title with promises that is very common in doing business with certain US firms. What is currently on the table is that you bring some or all of your customer list (the clients are following you, not being attracted by Unknown INC.); you continue to do the work, take some of the income that you would get all of as a freelance and the company get a new outlet, with little or no risk. I'm pretty sure if a client came to you with queries on a similar issue to them, it would be a little bit easier for you to see the wood from the trees
Unless this is a credible firm that will attract a slew of work, take a deep breath and set up on your own.

Annisele

Samsonite1 wrote: »

I have been considering setting up my own company for many years, but giving up a good permanent package is a big deal when you support a family.

But this doesn't (on the face of it) look any more secure than contracting. You won't get a wage, and you seem unclear about how you will be paid. If you don't get paid at all, there may be very little you can do about it.

One big aspect of this is that I am not necessarily allowed to leave my company and start doing work for their clients. My friend's company is am approved partner so there is little risk going that route. Starting my own company runs the risk of no earnings for 6 months.

Ah, so the thing your friend brings to the table is "approved partner" status. Before you jump, I think you need to be sure exactly what that means. Can it be withdrawn? If so, in what circumstances - and what would the effect be? If your current employer got annoyed over the whole affair, how difficult could they make things for you?

Samsonite1

Annisele wrote: »

Ah, so the thing your friend brings to the table is "approved partner" status. Before you jump, I think you need to be sure exactly what that means. Can it be withdrawn? If so, in what circumstances - and what would the effect be? If your current employer got annoyed over the whole affair, how difficult could they make things for you?

I do not think you can really lose the approved partner status because partners engage directly with clients moving forwards and are essentially another provider of services. What is important about the partner status is you get access to all of the proprietary software, tools and licenses needed to do the job. If I went alone, I would not be able to do aspects of the job that a partner can do. So having the partner there already is giving me a bigger head start.

paddyrg

Just a thought about jumping to an approved reseller - does it really effect the notice periods, exclusivity periods etc? What could be seen as 'poaching staff' by an approved partner may actually be a material breach of the partnership agreement - and I'd say it's important enough to want to be certain. If (worst case scenario) your switching was a material breach, and the company lost the partner status because of it, everyone would be worse off!

Depending on the partner programme details, some involve a bit of vetting and access to tools in return for a fee and enhanced conditions - but as the consulting profit doesn't get taken by the original org itself it's still breaching the no poaching/competition rules.

Mistral001

One aspect of this which I can see as good is that you get to use software that you cannot afford to pay for on your own. That is the sort of good reason that partnerships are formed in the first place. the pooling of and sharing of resources and expertise is why solicitors and accountants usually work best in partnerships for example. However, what will your future business partner want for this? Is it your present clients? If it is then I would avoid the proposition as that might help your business career in the short-term but in the long-term it could damage it greatly as people have long memories. Have you thought of putting some money into the proposed partnership (as it really is a partnership that is being proposed here in my view) yourself?

Samsonite1

Thank you all again for the contributions. I have been thinking about it for a while and certainly it seems as though it is not worth giving up my current permanent situation for this - I would be better off setting up my own company and doing everything how I want as well as knowing how it would work. Actually after asking questions to my friend, he thought that perhaps there were better options for me. These directors/partners are further down their career path (i.e. considerably older than me) and are looking to work less and invest in a comfortable life.

Interesting timing though as I have been contacted about a couple of contractor opportunities and after initial talks and making it clear that it would take something special to prize me away from my current situation - they said "name your price"... anyway, I do not want to get to excited because contracting is still not as desirable as a high permanent salary with good pension, healthcare, etc.

I will probably start another thread more specifically about starting my own limited company in order to do contracting as this seems like the sensible alternative to what I have or at least potentially...