Employed AND sole trader..

[wonder]

I'll apologise in advance for the meandering story-like prose of this post, but I want to include as many details as possible! I need to understand my legal position in regard to several things, and any potential pitfalls I need to be aware of.

Recently (3 months ago) I was made redundant as the company I worked for went into receivership. At the time I had several options going forward (various offers of full time employment, freelance contract work, starting my own business, etc).

I registered a new business and set myself up as a sole trader in the interim while I completed a few contracts and decided what my next step was.

The MD from my old company started up a new business shortly after (keeping many of their previous clients), and offered me a job, on an increased salary. We had / have a good working relationship, and the position was attractive, but I explained that I wanted to work on my business too, as I wanted to focus on some different areas than I would be able to with him - my ideal situation was to contract for him.

Both our businesses (his is a LTD company, mine is currently sole trader) operate in the same industry, but different 'sectors'. The industry is digital marketing, with his operating in a specific blue chip IT / Technology specialist niche (at least that is the intention), and mine focussing on SME's, e-commerce & affiliate marketing.

He considered my request to contract, but decided that it would be too expensive (for the same amount as contracting me for 4-6 months he could employ someone for the entire year). We discussed his job offer, and I explained that I would accept (for 2 reasons - at this stage I wasn't sure how much work would come in after my initial contracts so the offer of guaranteed income and a pay rise was hard to turn down, plus I enjoy working with him), but on the condition that I could optionally take 1 day a week off to work on my own things. This was accepted.

So I now am in a situation where I am employed, and also have my own business running alongside. I give 1 weeks notice if I need the day off the following week.

This is a perfect situation for me - I have the security of guaranteed income from my main employment, which I also really enjoy, and can also focus on generating income streams from my other activities and slowly build a client base, and generate supplemental income.

However, I do not understand where I stand legally in regard to this situation, and conflicts that may arise from it in the future.

I should also point out a couple of things:

• My pay rise was dependant on my investing 3k into his business in the first year (payrise was 4k, 3k goes straight into buying my shares), so I am one of 3 current share holders (my old MD and 1 other own around 35k worth of shares between them). Under the old company setup I was paid commission, under this one the idea is we will gain from dividend payments.
• If my business takes off I would want to devote more time to that, though I would like to continue working with my old MD if possible.

So, questions:

• Is there a conflict here? If so, could you detail where and why?
• Is there a problem being a shareholder of 1 business, employee AND sole trader?
• Was accepting to invest the money / and getting dividend payments a good move? (instead of saying I dont want to invest)
• How are decisions made regarding dividend payments? (do I have any say as a minor shareholder?)
  • What is the minimum requirement to recieve any sort of dividend payment?
• What needs to be in my contract to protect my position? (ie having 1 day per week optionally off, running a business alongside, confirming that I own shares, etc)
  • What needs to be in my contract to ensure that if the situation arises I can leave the company & take my investment out without problem?
• What is the best 'setup' for me in term of maximising my income, and minimising my tax bill (for example should I change my business classification to LTD Company instead of Sole Trader)?!
  • My salary is 37k (pro rata, so deduct any days I have off to work for myself (I do get standard 4 weeks holiday per year too), 3k in first year goes into the company to buy shares.
  • I will get undetermined dividend payments
  • I estimate my own business to turnover an absolute minimum (I already have invoiced this amount) of 20k, with profits of 10-15k.

For anyone who managed to read through all that and reply, many thanks! If this thread should be in a different forum, please let me know and Ill move it.

 

[sjbeale]

You need to speak to an accountant who should be able to provide advice on how to manage your affairs.

 

[bwglaw]

You need to seek advice from a lawyer as well to ensure your rights are protected, as a shareholder, amongst other things. Happy to advise and quote if you email direct

 

[TechFox]

...mine focussing on SME's, e-commerce & affiliate marketing...

I am looking to network with people interested in things like affiliate marketing. Perhaps you would be interested?

 

[maxine]

Hi Wonder,

I managed to read through all that but not sure I can be much help I'm afraid other than recommend finding yourself an accountant that you can talk things through with.

My understanding from reading this is that you are part time employee (director) of the company you have shares in and will receive salary and dividends.

In terms of protecting yourself I think you should have a contract of employment with the ltd co setting out your employment terms ie; how many hours a week you are employed for, how much notice you need to give or what the process is for you leaving the company, how disputes will be resolved, what happens to your investment etc.

You may be able to see a business advisor via Business Link or even through your bank.

I dont think changing your own business to a ltd co will have many benefits and not sure what you would see as the advantages? Seeing an accountant for tax advice will put your mind at rest I'm sure

Regards
Maxine

 

[wonder]

Following up from my original post, I am amending my contract to include the necessary clauses before I sign it.

I have a query over 2 points in my contract:

1)Is this standard part of an employment contract:

Involvement with XXX clients
You will not, for a period of six months following the termination of your employment, for whatever reason, solicit or entice in relation to a business which may in any way be in competition with XXX, the custom of any person, company or organisation who, at any time during the period of one years preceding the termination of your employment, has been a client or employee of XXX and who during that period you had had material dealings.

2) Is this sufficient in terms of stating I am able to conduct work for my business as well as my employers business / should I give more detail?:

Undertaking private professional or other work
You are able to optionally take 1 day per week off unpaid to undertake work for Wonder Digital so long as it does not conflict with the interests of XXX. Work would be considered a conflict if XXX and Wonder Digital were in a position to compete for a client or project.

 

[Cathy Wootton]

I have seen this in a couple of my contracts over the years due to the nature of the business / competition poaching staff etc.

I would definitely be weary though as even though you say your businesses are different sectors if they are in the same industry you could potentially be making it that you are unable to run your own company if you leave and end up in a Tribunal. I would certainly get some legal advise!