Limited company investing in a sole trader?

[Stircrazy]

Just a quick question. I own an (online media) limited company and I'm looking to branch out and invest in other areas.

I've been offered the chance to buy into a conference centre, office rentals and self storage company (it was office space I was orginally looking for :redface. At the moment all this is run under a sole trader trading as xxxxx (although planning on going limited in the near future).

I asked my accountant and he said I can't invest in a sole trader's business, I have to buy actual shares. Is that right? Surely a contract is a contract, and a percentage is a percentage (whether by shares or by profit)?

Any advice gratefully received

 

[Philip Hoyle]

If you buy into a sole trader business, then it isn't a sole trader business any more - it becomes a partnership or converted to a limited company.

 

[David Griffiths]

It is quite possible for there to be a partnership between an individual (e.g. the current sole trader) and a limited company.

 

[elaine@cheapaccounting]

What will the investment agreement look like? How long are you investing for? How will you take your return on investment? What is your exit strategy?

I would suggest some tax planning with an accountant on how you approach your investments here.

Getting the right approach to handle returns and exit is key.

Good luck

 

[akirk]

you can invest anything with anyone given the correct legal agreement...
however, more of a concern is that very often sole traders associate their company with themselves and haven't stepped forwards to the point where they see the company as its own person and therefore make decision to benefit the company - this would be more of a concern for an investment than anything else - you would need to feel comfortable that the person concerned is going to work for 'the company' not themselves - so moving to the more formalised structure of a ltd. company would for me be mandatory as a part of the investment...

Alasdair

 

[Stircrazy]

Great Thank you for your replies.

Looks like I'll have to go back for another meeting. Hope I get a discount on his time and some decent advice this time.

Ta all