Allocating Shares Sole Trader - how?

[jklondon]

Hopefully someone can help here, must be a common problem but did some searching and could not find a suitable answer..

I operate sole trading company and need to allocate x% of this company (which will begin trading at the end of the month) to my lead developer.

Does anyone have (or can point me to the direction of) legal contracts for this?

Thanks!

 

[Alpha]

So are you in effect going to form a partnership? In which case you require a partnership agreement (Don't try doing it yourself as it invaraibly leads to problems later on, use a solicitor)

Or are you simply going to pay the developer a commission depending on work sales made that he has contributed to?

it sounds like the former but need to check.

 

[Joyous]

I operate sole trading company and need to allocate x% of this company (which will begin trading at the end of the month) to my lead developer.

Hi JK

Are we talking about an actual limited company with shares or an unincorporated sole trader business.

If it's unincorporated then as Alpha says you are forming a partnership for which you'll need to draw up a partnership agreement. I would definalely second Alpha and advise you to get a solicitor to draw it up because as well as profit shares there are a raft of other issues to consider.

If you have an actual limited company then you can issue more shares such that you and your partner subscribe for shares according to the required percentage holdings. You should do this before the company starts trading as the shares currently have no value thus avoiding the complications of trying to reorganise the structure later on.

Regards

Joy

 

[autolycus]

Another option is to incorporate (i.e. form a Ltd company) and allocate x% of the shares in the new Ltd company to your developer and the remainder to yourself. Then transfer all assets etc from the sole-trader business into the Ltd company.

Whatever way you do it you should, as others have said, get legal advice and have proper agreements drawn up. I have used, and would recommend, Roger Sinclair for joint venture agreements. See www.egos.co.uk and specifically http://www.egos.co.uk/FAQ/jointven.htm.

Dave.

 

[bwglaw]

Thanks for the recommendation...

I would agree that it is a Partnership Agreement you will need in your present circumstances, unless you are a Ltd Company. I am able to draft such an agreement if you contact me direct.

 

[autolycus]

Thanks for the recommendation...

:?

 

[bwglaw]

Meant to be sarcastic... maybe I have not been around long enough Was not referring to anyone in particular

 

[jklondon]

thanks for the reponses to clarify my situation ..

I am sole trading and need to give a percentage stake to someone else and I dont want to form a LTD company until I need to.

anyone RECOMMEND a good solicitor of the boards who could help in drawing up a partnership agreement? Dont have much time so thinking of doing a "Memo of Understanding" with a few key clauses and making it open .. i know its not ideal but how difficult can it be to express .. i.e. whats the dangers?

 

[autolycus]

thanks for the reponses to clarify my situation ..

I am sole trading and need to give a percentage stake to someone else and I dont want to form a LTD company until I need to.

Ok. What you need then is a partnershop agreement as referred to in some of the earlier posts.

anyone RECOMMEND a good solicitor of the boards who could help in drawing up a partnership agreement?

Not used anyone on the boards for this sort of thing. So, my recommendations are:

1. Handsongroup who posted above (based on what I have read others say about him)

2. Egos Ltd as per my earlier post (not a board member but very good)

Dave.

 

[autolycus]

Meant to be sarcastic... maybe I have not been around long enough Was not referring to anyone in particular

No worries. I just thought for a minute that perhaps you were somehow linked to the firm I had recommended.

 

[bwglaw]

thanks for the reponses to clarify my situation ..

I am sole trading and need to give a percentage stake to someone else and I dont want to form a LTD company until I need to.

anyone RECOMMEND a good solicitor of the boards who could help in drawing up a partnership agreement? Dont have much time so thinking of doing a "Memo of Understanding" with a few key clauses and making it open .. i know its not ideal but how difficult can it be to express .. i.e. whats the dangers?

A percentage stake cannot effectively and legally be transferred to another person unless a Partnership is formed and allocating a % between the two partners i.e. 60/40, 70/30 etc.

I would strongly advise not to attempt to draft it yourself as a 'Memo of Understanding' because if you miss out any key clauses then you may lose any rights you intended to have because the Partnership Act 1890 comes into play where an agreement does not exist or is absent on the key clauses.

When I draft Partnership Agreements I also look into the situation and point out any difficulties. I had a client that wanted to form a Partnership and once I pointed out the difficulties they went away to work it out. The problem they had was that the Partnership did not have an office so all accounts would be held at one partner's house - how does the other Partner gain access when needed? This is a serious issue when Partners are jointly and severely liable and needs to be accurately drafted in the Partnership Agreement