Your thoughts on new business

[Svyatoslav Nod]

Hi everyone . Just need your thoughts please. Just briefly about me as acontext for you to better understandwhere I am at with business.

Back in 2019 in May in the very first lockdown I was made redundant. Copany that I have worked for had to reduce their number of employees to survive so I had lost my job. But relationships with my MD were very good and I have became a subcontractor to my ex employer doing all of the same work I was doing when was employed. I have started as a sole trader and company started bringing healthy profits so my wife and I decided to form a Limited company. Our Ltd started in February 2021 so it is only few months old. Our main work was coming from the formr company I used to work for. Now this is where I would like to hear your thoughts please...

My former boss is at the age where he has had enough in running a company and wants to start preparing for his rtirement. But the business industry is still very good and would be a shame to come out of it completely. So I approached him and asked if he would carry on with reduced days and perhaps working together? He is open to this proposal and we are currently in discussion on the best ways to work together. Because he has made up his mind to cole his old company because of 20 years liability we are thinking to form a new company altogether. He would become my employee with up to three days a week or less depending on the work load . This is where I cant make up my mind which is to do with my current company I'm running. If he comes on board with me he will bring in all of his old stock and therefore will buy his shares in my company. I am thinking what is best -
a) to form another Ltd within my existing company
b) to start another company altogether

Obviously you need finance to start a new company which we don't have , but have a healthy assets in exisitng company - van and cashflow is very good at the moment.

Does anyone here been in a similar situation ?

 

[Deleted member 335660]

Hi everyone . Just need your thoughts please. Just briefly about me as acontext for you to better understandwhere I am at with business.

Back in 2019 in May in the very first lockdown I was made redundant. Copany that I have worked for had to reduce their number of employees to survive so I had lost my job. But relationships with my MD were very good and I have became a subcontractor to my ex employer doing all of the same work I was doing when was employed. I have started as a sole trader and company started bringing healthy profits so my wife and I decided to form a Limited company. Our Ltd started in February 2021 so it is only few months old. Our main work was coming from the formr company I used to work for. Now this is where I would like to hear your thoughts please...

My former boss is at the age where he has had enough in running a company and wants to start preparing for his rtirement. But the business industry is still very good and would be a shame to come out of it completely. So I approached him and asked if he would carry on with reduced days and perhaps working together? He is open to this proposal and we are currently in discussion on the best ways to work together. Because he has made up his mind to cole his old company because of 20 years liability we are thinking to form a new company altogether. He would become my employee with up to three days a week or less depending on the work load . This is where I cant make up my mind which is to do with my current company I'm running. If he comes on board with me he will bring in all of his old stock and therefore will buy his shares in my company. I am thinking what is best -
a) to form another Ltd within my existing company
b) to start another company altogether

Obviously you need finance to start a new company which we don't have , but have a healthy assets in exisitng company - van and cashflow is very good at the moment.

Does anyone here been in a similar situation ?

I am afraid that some of your typos make it difficult to understand the issues.

Why can’t you just employ him in your existing company?

Why can’t you make him a director/ shareholder of your existing company?

 

[cjd]

What does "his company has 20 years liability mean"? He can't just close a company that is in debt and keep the stock. Be very careful.

What is this business?

 

[Mr D]

Hi everyone . Just need your thoughts please. Just briefly about me as acontext for you to better understandwhere I am at with business.

Back in 2019 in May in the very first lockdown I was made redundant. Copany that I have worked for had to reduce their number of employees to survive so I had lost my job. But relationships with my MD were very good and I have became a subcontractor to my ex employer doing all of the same work I was doing when was employed. I have started as a sole trader and company started bringing healthy profits so my wife and I decided to form a Limited company. Our Ltd started in February 2021 so it is only few months old. Our main work was coming from the formr company I used to work for. Now this is where I would like to hear your thoughts please...

My former boss is at the age where he has had enough in running a company and wants to start preparing for his rtirement. But the business industry is still very good and would be a shame to come out of it completely. So I approached him and asked if he would carry on with reduced days and perhaps working together? He is open to this proposal and we are currently in discussion on the best ways to work together. Because he has made up his mind to cole his old company because of 20 years liability we are thinking to form a new company altogether. He would become my employee with up to three days a week or less depending on the work load . This is where I cant make up my mind which is to do with my current company I'm running. If he comes on board with me he will bring in all of his old stock and therefore will buy his shares in my company. I am thinking what is best -
a) to form another Ltd within my existing company
b) to start another company altogether

Obviously you need finance to start a new company which we don't have , but have a healthy assets in exisitng company - van and cashflow is very good at the moment.

Does anyone here been in a similar situation ?

Ummm.... he will buy shares in your company if you are willing to sell them. No need to sell shares, you can simply buy his stock.
Giving shares is somewhat problematic - they can then sit back and wait for the money to come in. Shareholders do not need to work for the company and a shareholder you end up not getting on with can be problematic.
Oh and the value of the stock he is selling may be a LOT less than he paid for it. Plenty of companies end up with slower moving stock, over time it may effectively be worthless to someone else as its not a quick seller. Way too many times have seen a seller insist on full wholesale value for stock that they cannot sell for that price anywhere else.

 

[Svyatoslav Nod]

I am afraid that some of your typos make it difficult to understand the issues.

Why can’t you just employ him in your existing company?

Why can’t you make him a director/ shareholder of your existing company?

Thank you for your reply. Sorry for my typos.
He doesn't want to be a director but yes probably way forward is to employ him for three days a week or certain amount of days part time per months .

 

[Svyatoslav Nod]

What does "his company has 20 years liability mean"? He can't just close a company that is in debt and keep the stock. Be very careful.

What is this business?

The business is environmental remediation specialising in oil spill clean up. What I mean by liability is that if say 5 years ago the company was involved in an oil spill cleaning up operation, they are liable if something goes wrong even now. Taking the old company or buying it off my ex MD will mean that I'm buying the company with their liability. There's always a risk that the oil smell may come back because it's impossible to extract everything from the ground for example. He is closing his company and the company is not in debt but has many people who owe them money. Good advice on being careful thank you

 

[cjd]

The business is environmental remediation specialising in oil spill clean up. What I mean by liability is that if say 5 years ago the company was involved in an oil spill cleaning up operation, they are liable if something goes wrong even now. Taking the old company or buying it off my ex MD will mean that I'm buying the company with their liability. There's always a risk that the oil smell may come back because it's impossible to extract everything from the ground for example. He is closing his company and the company is not in debt but has many people who owe them money. Good advice on being careful thank you

Ok, Yes, you don't want to become responsible for someone else's liabilities.

In that case my first thought are that you should buy whatever stock he has that interests you and hire him as an employee on whatever terms work for both of you. Don't give away equity unless you have to. Someone that has retirement in mind is not going to be an asset you in the long term.

 

[Svyatoslav Nod]

Ummm.... he will buy shares in your company if you are willing to sell them. No need to sell shares, you can simply buy his stock.
Giving shares is somewhat problematic - they can then sit back and wait for the money to come in. Shareholders do not need to work for the company and a shareholder you end up not getting on with can be problematic.
Oh and the value of the stock he is selling may be a LOT less than he paid for it. Plenty of companies end up with slower moving stock, over time it may effectively be worthless to someone else as its not a quick seller. Way too many times have seen a seller insist on full wholesale value for stock that they cannot sell for that price anywhere else.

Thank you for your reply. The stock is mainly equipment that I need for the company to function. Filters , tanks pedestrian barriers etc. Each time anything goes onto the site that we are working on we can charge for it. I wouldn't pay for the stock what was paid for originally because it has devalued for sure. Thank you for your thoughts

 

[Svyatoslav Nod]

Ok, Yes, you don't want to become responsible for someone else's liabilities.

In that case my first thought are that you should buy whatever stock he has that interests you and hire him as an employee on whatever terms work for both of you. Don't give away equity unless you have to. Someone that has retirement in mind is not going to be an asset you in the long term.

Thank you I agree completely ! I was thinking along those lines so this is a confirmation !