Bringing a partner into the business

[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

[Alpha]

Poshgaffer

Since you are a sole trader you do not actually need to overcomplicate the situation.

So far everything in the business belongs to you, you do not tecnically need to pay yourself a salary as all the profits(after tax) belong to you and can be drawn by you. Anything you have not drawn is represented by your capital account.

If we assume that you stay as a sole trader and pay the other person in the way that you outline then there is no problem doing that.

Should you then wish to bring the other person in as a partner in the future you will need to draw up a partnership agreement.The partners capital account will start to build up from the moment that he is introduced into the business.

There is no 'requirement' for the other person to buy into the business if you do not want them to.
Just outline what you want the essence of the partnership to be in the agreement.