Investment opportunity

[Leson50]

About to take a minority stake (3%) in a new business. Appreciate any advice legal or otherwise.

 

[Lancelot]

I am sure that no advice can be provided based on the information given. What's this new business? Microsoft? The corner shop?

Generally speaking 3% ownership doesn't mean much in any business because it is unlikely that you will have a say in the way the business in managed.

However, if the business is able to generate a return that is higher than what you would get on a stock market or from a bank deposit, then yes, the investment can be a good thing.

Does the business fall under Enterprise Investment Scheme? If yes, then you may get tax relief.

Speaking on tax, you may have CGT and potentially IHT issues when you want to dispose of your interest if your spouse is also a shareholder, etc.

 

[lockyer]

Can you afford to lose what the 3% has cost you? If not don't do it

 

[LicensedToTrade]

Is the money you are paying for 3% an accurate valuation of the business?

In other words are you receiving a stake that is proportionate to the value you are investing?

E.g. if you were investing £3 and this buys you 3% then the business would be valued at £100 from your point of view. But if you are investing £3 and total of all other investments is only £7 then you are effectively stumping up 30% and only getting 3% in return.

 

[internetspaceships]

3%?

Well you wouldnt be posting on here if it was 3% of a multi million pound company because you'd have already done this kind of thing before.

Advice? Well you haven't given enough information to give much really but I'd be intrigued as to what you've bought 3% of, and what it's cost?

How was that 3% valued?

 

[Leson50]

Sorry for the lack of info. I'm buying shares in the company which gives me a 3% stake. It's a food company opening in a retail park and the potential return is quite handsome.

 

[internetspaceships]

That still says absolutely nothing mate and gives us nothing to work with.

Blunt I know, but true.

 

[obscure]

Are you paying for this stake or just getting it as part of the start-up process. If paying how much are you paying. How much are the other shareholders paying and what % will they have. What will your role in the company be?

 

[Leson50]

I have the opportunity of paying £10,000 for a number of shares which gives me 3%. The business is an Italian food outlet in a retail park. I'm one of a number of potential investors. The majority stakeholder already owns a fairly successful restaurant and has offered me the opportunity to invest.

 

[internetspaceships]

He's got his business valued at £333,000 by those figures.

How has he come by that valuation and what's he looking at raising the money for?

 

[pentel]

Far too many unknowns.... if its a fully paid for freehold property which will be in the business then possibly ok. If its a leasehold and the £333,000 is for fit out and running costs then I would be looking to get my money back in 2 years max.

 

[LicensedToTrade]

Take a look at the www.deathclock.com to find out when you are going to die.

I just looked and it turns out that I'll be dead long before the OP answers all of the simple questions that have been asked. It's like trying to draw blood from a bleedin' stone.