Starting a Ltd company

voixdeville

We are two couples, who are thinking of starting a business together.

The idea is to purchase a vehicle (between the four of us), in order to rent this out. The profits will then be returned to the business with a view to possibly buying more vehicles in the future if we are successful.

One of the individuals already has a company which they set up two years ago to do this (the company has been dormant since then). This is a limited company.

Each couple will contribute to £12,000 to purchase the vehicle initially.

I was wondering what we will need to do to ensure that the other three individuals are set up as partners within the company – and to ensure that they are legally entitled to an equal share of the profits.

I was also wondering, whether we need to contract, to ensure that legally each partner has an equal share of the business- and to recognise the £12,000 contributed by each party.

Please could you advise. Thank you in advance

Savvy_Sue

I'd say get proper legal advice to set up your company in the way you need it, someone who specialises in company setup. This is not something you can safely DIY. 

voixdeville

Savvy_Sue said:

I'd say get proper legal advice to set up your company in the way you need it, someone who specialises in company setup. This is not something you can safely DIY. 

Thanks for your reply. Any ideas where the best place would be to go for advice please? Thanks

Pennywise

Why would you use an existing company and have to change the directors/shareholders to what you want rather than just set up a new one formed exactly how you want it for around £10-£15?  Makes no sense.  The person with the old company just needs to get it struck off.  Far simpler/cheaper to form a new one rather than waste huge amounts of time researching (or getting an accountant to do it).

bris

1 cheap car for a rental company between 4 of you? Seriously, it will take years to show any profit, how much money do you have to buy more and when? Rental income will take years to accumulate enough funds to purchase more cars so that means personal borrowing, how much are you prepared to lose?

The risk is to great and your insurance premiums will be sky high.

richardw

How does car hire make money?

davelewis

Get a formal Partnership Agreement drawn up by a solicitor. Should cover all eventualities. 

deedee71

bris said:

1 cheap car for a rental company between 4 of you? Seriously, it will take years to show any profit, how much money do you have to buy more and when? Rental income will take years to accumulate enough funds to purchase more cars so that means personal borrowing, how much are you prepared to lose?

The risk is to great and your insurance premiums will be sky high.

I assumed by vehicle the OP meant canpervan 🤔

Annisele

Are you certain that you want to run this as a limited company rather than a partnership? You mention a limited, but also being "partners" in the business - and those two structures are very different beasts.

It's also not at all clear to me that there's any money in this. I'd have thought your insurance costs would be a killer. And with only one vehicle, you're going to struggle to compete against the established players - unless you have a pretty niche target market?

DoctorStrange

Sounds a risky business but that aside you need to agree on the structure first (partnership or limited company).

If going down the ltd company route, I agree a new company is better than reactivating a dormant one, and I'd suggest arranging the shares to reflect the money each director puts in e.g. there'd be 48,000 shares to start with, with each director owning 12,000 (25%)

I'm thinking of further down the line if more money is put in but not by everyone e.g. if only you put in an extra £2000 to cover some bills or something then you'd issue new shares so the total would be 50,000 with you having 14,000 and everyone else 12,000. That way,  all dividends will always be paid in proportion to contributions.

This isn't needed of course and you could just have 4 shares (1 each) but that might get messy if someone doesn't want to contribute later but still wants their original part of the business, so sorting it all out up front might save some time later. 

Savvy_Sue

DoctorStrange said:

so sorting it all out up front might save some time later. 

Time, grief, aggro ... outlining potential exit strategies while you're all on good terms rather than waiting until someone wants or needs out will be hugely beneficial.