Business Structure

[lositom]

I'm in the process of setting up a new business and needed some advice with regards to business structure.

There will be 4 shareholders including me as director.

I am director of 2 other companies - one of which is a 50/50 split where money is drawn as dividends only, the other (my main work) I am sole director/shareholder, pay myself the minimum PAYE and the rest through dividends.

1 shareholder is the 50/50 director of an unrelated company and takes minimum PAYE and dividends only.

The other 2 shareholders are employees of different organisations.

Ideally, the setup would be that we each own a percentage of the new company and then, as some of us will have more time to put into it than others, those putting in more work take payment for that time before profits are shared out based on shares.

Is it acceptable to invoice the company for that additional work (as a private individual) making that person responsible for declaring their income? or does it have to be done on an employer/employee basis? - which I'd rather avoid.

What is the easiest way to split profits/income based on level of input rather than ownership or before being split based on ownership?

This is a part-time business which will be done alongside our full time work.

Many thanks for your help.

 

[Mr D]

Are these people doing the work going to be self employed, workers or employees of this new company?
The method of being able to work determines their status, not you.

For instance will they have a start time, will they be able to send someone else to do the work in their place?

 

[lositom]

This will be very part time to begin with and we will all have parts to play but not equally in terms of time. So we would like to be able to pay extra to those who have put in more time (once we actually make money).

There will be no set work times.

I was thinking about different share classes, so issuing ordinary shares to everyone and then issuing non-voting shares in order to take into account the different time commitments people have and therefore eventual dividend payouts based on this.

 

[Mr D]

If you are required to pay them minimum wage at least then you would have to do so, regardless of whether you make money.

 

[obscure]

I was thinking about different share classes, so issuing ordinary shares to everyone and then issuing non-voting shares in order to take into account the different time commitments people have and therefore eventual dividend payouts based on this.

[Apologies to the RSPCA etc] Shares are forever, not just for Christmas.
It is very common for people's circumstances to change over time. Someone who commits to a large amount of time now may have to scale back in a years time. That means you will have to be moving shares around or issuing more shares as people's situations change.

 

[Noah]

[Apologies to the RSPCA etc] Shares are forever, not just for Christmas.
It is very common for people's circumstances to change over time. Someone who commits to a large amount of time now may have to scale back in a years time. That means you will have to be moving shares around or issuing more shares as people's situations change.

Agree with this - messing around with share allocations seems an unnecessary complication to me. Just pay people for the work they do, at agreed rates (agreed among the shareholders).

If I understand your question, aside from share considerations : Should the shareholders who do actual work for the company be treated as employees, or contractors paid on invoice? The answer to this is that it largely depends on the individual's circumstances, so the answer is probably "either", or maybe "both".

Which means all you have received from us here is advice and oipinions, not answers; life is frequently like that, isn't it?