Should I invite others to direct my business with me?

[CreatorChip]

Howdy all!

I found UKBF because I was looking for advice on this question.

Bit o' quick background first: my business once applied for a grant where it was necessary to be a NFP. So when I recently decided to incorporate, I sought advice on becoming an incorporated NFP — and most of the advice I got said "ltd by guarantee, 3+ directors" were the main essential ingredients to convincing funders of your NFP nature.

I quickly found the people I needed: a headteacher passionate about the service I've provided her school in the past, who offered key industry knowledge; an admin mgr also deeply supportive of what I do, who offered to help me put together the processes that would otherwise inhibit me doing the actual job; and another storyteller and great friend who was simply happy to be a name on paper (and occasional ideas trampoline) in order to ensure the business didn't disappear.

However, I also sought advice from an old boss and now good friend of mine, who has built several profitable ltd companies and is a fantastic salesman. He offered to be a voluntary non-exec to my new venture. And one of the first things he pointed out was that my business could be and should be lucrative. He also questioned why I'd need other directors, who could potentially take control away from me.

I also had a conversation with one of our key funders (the Arts Council) and discovered they don't care a hoot about whether we're NFP. In fact, they often favour businesses that can show a drive to be self-sustaining — which can mean the opposite of NFP!

The thing is, I still value the idea of having my three professional friends as directors. If nothing else, given the sector I work in (education), I think it will lend credibility — schools won't see a solo storyteller (of which there are hundreds) trying to overinflate himself, but will see there's a group of directors with relevant qualifications and experience all seriously debating the services we're offering.

So my thought at present is to go ltd by shares and be 100% owner, but have my board include these 3 others.

And before anyone asks "What's in it for them?", they have all already given me their pledges that they are doing it purely for personal satisfaction, having firm belief in the value of the work my business does.

So, to the hive of experience that is UKBF, I ask: does anyone see any benefits and/or potential pitfalls of my planned structure?

 

[g]

The 'benefits and/or potential pitfalls of my planned structure' aren't of great significance - although a for/against case could easily be made, your preference is viable and workable (subject of course, to appropriate M&As).

 

[CreatorChip]

The 'benefits and/or potential pitfalls of my planned structure' aren't of great significance - although a for/against case could easily be made, your preference is viable and workable (subject of course, to appropriate M&As).

Thanks G!

 

[g]

Thanks G!

Thanks.

It's useful to be aware that 'there's many ways to do various stuff, and so there's much in favour of one which you're personally more comfortable (and so helps you perform better)'.

Specifically with the extra directors boosting the perception of your operation... 'while it may not be necessary, it can't hurt'.

And, regarding influence upon you... consider their input appropriately - as 'external advice' which may be less valid than your own view.

 

[Newchodge]

The only thing I would be wary of is the future. Yes these people are happy to help for no return because they believe passionately in what you are doing. But when you start to make a decent profit there could be some disgruntlement. You need to plan for that possibility. You could, for example, give them a number of non-voting shares so they feel a part of the business, can benefit from its success, but don't take away your control.

 

[CreatorChip]

Thanks @Newchodge – I hadn't considered that possibility. Presumably that's easy enough to do when filling in the company registration docs?

But would that mean they'd have to be paid dividends whenever the company releases dividends to me? I ask as I was planning to take a minimum level salary myself for tax purposes but issue regular dividends so I can actually afford things like life...

 

[Newchodge]

Thanks @Newchodge – I hadn't considered that possibility. Presumably that's easy enough to do when filling in the company registration docs?

But would that mean they'd have to be paid dividends whenever the company releases dividends to me? I ask as I was planning to take a minimum level salary myself for tax purposes but issue regular dividends so I can actually afford things like life...

You can declare different dividend rates for different types of shares, but you ought to get professional advicc.

 

[Noah]

Thanks @Newchodge – I hadn't considered that possibility. Presumably that's easy enough to do when filling in the company registration docs?

But would that mean they'd have to be paid dividends whenever the company releases dividends to me? I ask as I was planning to take a minimum level salary myself for tax purposes but issue regular dividends so I can actually afford things like life...

Somebody posted this recently - apologies for not giving credit.

How to understand the different types of shares & class of shares

 

[The Byre]

Giving directorships and/or seats on the board to Tom, Dick and Harry also gives them an insight into your business, from which they may profit one day - and possibly at your expense.

However, I also sought advice from an old boss and now good friend of mine, who has built several profitable ltd companies and is a fantastic salesman. He offered to be a voluntary non-exec to my new venture. And one of the first things he pointed out was that my business could be and should be lucrative. He also questioned why I'd need other directors, who could potentially take control away from me.

You might like to listen to the man!