Shareholder Partnership for new business

[DUB 28]

Hi All

I hope you can give some guidance here. and apologies in advance for the long winded thread.

I have been working with a friend towards setting up a new company ( originally planned a partnership moving towards LTD Company)

It now turns out that My friend will not be able to commit more than 50% of his time towards the new venture.

Whereas I will be devoting all my time. I was wondering if anyone out there has any advice.

The idea was primarily mine but I do value the input that he has put into the business set up to date. And the value that he will be bringing to the role (however limited) moving forward.

Just wondering what are my options. We are due to meet and discuss in the next week and I would like to have my position researched and covered before then. And to put forward some proposed solutions.

My initial view is that if I am putting 100% effort in then I should be looking at a majority stake of the company. As I will be the point man moving forward. I have no problem with him looking at other supplementary revenue generating options due to his personal situation.

I also have no problem in putting in more funding to the company at the start.
I have read in other threads about Directors' Service Agreements, Memos of understanding, shareholder agreements etc...and they will be set up accordingly before we move forward. we are both in full agreement about this.

I think we need to sort this out and have it included in our shareholders agreement before we launch and go to market.

just wondering if any of you have previous experience?

thanks

 

[Brendan Burgess]

There are no hard and fast rules.

But some guidelines.

The first priority is to make sure that employees get paid fairly for the work they put in. So all other things being equal, you should get a full salary for what you do and he should get a part-time salary.

After that there should be a return on the capital employed. If it's very risky, you would expect a higher return. If you are investing a lot, then you will want most of the profits.

Given that it's your idea, that you will be working full-time and that you will be providing most of the capital, I think you should be aiming for 100% of the shareholding and profits.

You can thank him for his input by maybe paying him well for his part-time job. Or you can offer him shares in the business cheaply.

 

[DUB 28]

Thanks for that, I suppose I have always thought of him as equal partner. Until last week. We should be okay as long as we have the agreements in place beforehand.