Shareholder

AriaJane

Hi there,

My brother in law relatively recently started up his own business. He has secured contracts and has offered my husband, his brother, a job paying him a salary and also a 5% stake in the Company.

Based on the Contracts already secured the net profit is £70k per week. Is my understanding of this correct in that my husband will receive 5% of this figure....and is it taxable?

Thanks in advance

Comms69

AriaJane wrote: »

Hi there,

My brother in law relatively recently started up his own business. He has secured contracts and has offered my husband, his brother, a job paying him a salary and also a 5% stake in the Company.

Based on the Contracts already secured the net profit is £70k per week. Is my understanding of this correct in that my husband will receive 5% of this figure....and is it taxable?

Thanks in advance

No, your brother would receive 5% of the dividends payment (which is taxable) the profit would be split between dividends, floating fund, and investment (and others)


It's very rare for a new company to make £70k profit per week, so are these contracts short term?

AriaJane

Thank you. Do you mean my husband will receive 5% of the dividend? What determines what the dividend amount is?

My brother in law holds 55% share
My father in law hold 40% share
My husband (will) holds 5% share

We know it's rare, but it is what it is. The contracts are for 5 years with two 2 year extension options.

Comms69

AriaJane wrote: »

Thank you. Do you mean my husband will receive 5% of the dividend? What determines what the dividend amount is?

My brother in law holds 55% share
My father in law hold 40% share
My husband (will) holds 5% share

We know it's rare, but it is what it is. The contracts are for 5 years with two 2 year extension options.

The board would decide, so they may share out all the profit, or decide to re-invest all of it (the BIL would decide as majority shareholder)

AriaJane

Perfect, thank you very much for your time.

steampowered

You should check whether your husband actually holds a 5% share of this company.

It is not uncommon for people to be promised a "stake" in a company, without the company ever actually issuing shares to them.

Does he have a share certificate? If not, he may not actually be a shareholder. It is worth having a good read of the contract to understand what he is actually entitled to.

AriaJane

We will definitely make sure, but it's a family run business so I don't think it likely his dad and brother would do that to him.

Savvy_Sue

AriaJane wrote: »

We will definitely make sure, but it's a family run business so I don't think it likely his dad and brother would do that to him.

Well, I'm sure you hope not, but you might be surprised, especially with minority shareholders in family firms.

There are various tendencies in this situation, but sometimes an expectation develops by the majority shareholders that the minorities should be 'grateful' for a job, any job, even if the terms and conditions are terrible. Or one or other shareholder takes the others for granted and expects to do either more or less work etc.

Please, for your own future sanity, make sure that agreements are in writing; that if your husband is employed (which is implied by the payment of a salary) that he has a clear, legal contract of employment; and that the shareholder agreement is in writing. If he's also being made a director of the ltd company, then he needs to understand his liabilities.