New partnership issues

[poshgaffer]

Dear all,

I am a sole-trader recruitment consultant & have recently started trading. I am planning to bring in a partner by springtime next year & I am offering him a 25% stake of the business. I have already worked in a previous company with this person for many years & he is the person for the job.

I have previously posted on this site & received some good advice on how to do this. I understand that the business needs to be valued & an amount calculated for goodwill, which I will do at the end of the tax year.

The problem is that he does not seem to be willing & cannot afford to bring any capital into the business. The truth is that neither did I, as I am working from home & set-up costs have been minimal.

I have spoken to him about starting salaries & he is willing to accept a low level of say £1000 basic per month (like me) with commission paid on the business that each of us brings in.

However, I am wondering whether he should also bring in some capital, what is normal / acceptable?

Please help,

Kind regards,

poshgaffer

[FE]

I am not best placed legally to advise so it is only my opinion but would have thought it would rely on what business and profit he brings to the company.

I am assuming he will not just accept a salary and hence why he wants a share of the business. This being the case and you to consider it he must be able to intorduce a substantial additional revenue stream. If that increases the value of the company then fine if not what is he getting for his capitol as does not sound like you have many assets?

Would it not be better to aquire Limited company status and then allocate the share issue as with a sole trader there are no shares to issue just a minority partnership?

I am sure you will get far better tax and legal advice but the underlying question of should you give him anything for nothing will depend on what you value his input

FE