New startup formation, protection

[Richardspink]

Hi
I have found an investor to work with on a new venture. He is investing 200k to my 50k.

What would be the best way to structure the business LTD LLP? To allow me the most protection. This business is a labour of love for me so I would always like to keep control of it and ideally the ability to make the majority of the decisions.

We have loosely agreed a 40/40/20 split of profits between the 3 partners. I will be the most active in the company and also receive a wage for acting as the manager until the point I replace myself with an employee. 40 would be me and the investor, 20 would be another partner someone who is bringing work to the business. I would like to protect myself from The investor 40 and the 20 joining together and removing me from the business (can't they do that???) this is my first business and I want to make sure i have covered all angles.

Does the split of company ownership always have to be the same as the split of profits. The 40:40:20 is just the divide of profits. Could there be a company agreement that it's actually 51/9/40 or something similar, I am assuming 51% gives me majority. Should the 20 underperform it would be good to have less reliance on him.

I would be interested in some legal advise and also real wold experiences of things to watch out for.

Thank you in advance

 

[Lawyer]

You can make the company's shaers into different classes or types of shares, sometimes called A B C shares etc and each type can give a different dividend, even if all three shareholders had the same % of shares. You could hae a majority ordinary voting shares if your partners agree and then you each get one of A B C shares non voting but dividend bearing shares or whatever combination you want. There are some resolutions needed to change the share capital and forms to file at companies house and you wiould probably need to change the Articles of Association of the company to reflect whatever you agree and most importantly of all need a written shareholders' agreement (contract) between the three of you setting all this out and particularly including what matters which shareholders have a veto over. Also bear in mind that you need over 50% of shares to dismiss a director.