How do I profit share to customers?

[PapaButch]

Good day all,

I have a new business and am a new member to this site. My business builds automation projects for the food industry and is setup as a limited company.

The whole aim of this business is to share profits we generate back to UK farmers every year. But as a LTD company I can't seem to do this in a typical bank transfer way....

Could anyone please enlighten me how to do this without giving shares away? I operate on trust and so do my customers.

Many thanks!

Chris Butchers

 

[Mark T Jones]

Some form of social enterprise seems logical = perhaps a CIC?

 

[YuriyZaletskyy]

Reminded me movie "Promised Land" of 2012. If to skip emotions which this film stresses out, it has partnership agreements and profit sharing ideas. Of course, not legal guidance by all means, but why not speak with lawyers on partnerships and profit sharings?

 

[FriendsInvest]

Good day all,

I have a new business and am a new member to this site. My business builds automation projects for the food industry and is setup as a limited company.

The whole aim of this business is to share profits we generate back to UK farmers every year. But as a LTD company I can't seem to do this in a typical bank transfer way....

Could anyone please enlighten me how to do this without giving shares away? I operate on trust and so do my customers.

Many thanks!

Chris Butchers

Hi Chris!

Answer below!

1. Profit-Sharing Agreements:
   Draft a clear agreement with farmers, stating they’ll receive a fixed percentage of annual profits. This avoids shares and instead sets up an annual transfer based on profits.
2. Supplier Rebates or Loyalty Bonuses:
   Offer farmers a "rebate" or "bonus" based on their involvement or partnership level. This payment can be recorded as a business expense, is tax-deductible, and can be transferred directly to farmers at year-end—no need for equity.
3. Annual Farmer Fund:
   Set aside a dedicated portion of profits into a fund specifically for UK farmers. It’s a tax-efficient way to support them yearly, avoids share issuance, and looks good from a social responsibility angle.
4. Bank Providers for Easy, Low-Cost Transfers:
   To simplify profit-sharing payments, look into business banks like Starling Bank or Revolut Business for low-fee, user-friendly transfers. These banks often support bulk payments, which can streamline your annual distributions.
5. Using Stripe for Payouts:
   Stripe is another effective option, allowing you to make secure, automated transfers to multiple recipients. With Stripe Connect, you can distribute profits directly to farmers’ bank accounts. They charge a small transaction fee, but it’s scalable and great for automation.

Each approach lets you handle profit-sharing through direct bank transfers without giving away equity. Plus, the right banking or payout service can make the process smoother and cost-effective.

Thanks!

 

[Paul Kelly ICHYB]

What is the exact issue?

How do I make the payments?
or
How do I decide who gets the payments?
or
How do I administrate the fund and payments?

 

[eteb3]

What does “back to farmers” mean? To your own farmer customers, to an industry body, to a charity working to support them?

How will you be transferring to them?
If by dividend to customers, you probably want to look at a registered co-op: their share structure is very flexible. You get much of the flexibility an unlimited company enjoys, but with limited liability. A company can convert with a special resolution.
If by discount on customers’ accounts, then any business form will do.

If the whole capital of the biz (minus shares at par) goes back to customers on dissolution, that makes it a fully mutual and exempt from corporation tax. That does mean there are no capital allowances either, but it can be a good move depending on your capital spend.

If you can give more detail on what exactly your model is there may be more precise suggestions