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  • New Members

    Business partnerships

    I joined forces with another investor 10 months ago, he has the bulk of cash and no time, myself some cash and all the time. Initially, I was contributing £30k of my savings to this business.  Our vision is to replace his income and provide me with one to enable us both to build a business that fulfils our goals (pensions/security and income, a legacy for our families one day) To date we have got to know our area, tested our relationship, drilled down our strategy and worked out a 1.3 and 5 year target in a business plan. All good so far. During the 10 months, I have not taken any payment for my time but have used my own capital to live off. We based our projections on a cash flow strategy that has been a lot slower (learning lessons all the way) and therefore I have only invested on a light refurb and a 50% share of a fee to source a property for a cash flow generator; then have gone on to purchase something in our LTD company with a 50/50 share split in property that requires a refurb. To date we have not legally tied up our Shareholders agreement which has concerned me all along. I have sought a lawyer to help with this but partner has always said 'no time, we have other things to focus on, let's keep going in the meantime'  In the meantime, my time has been full on running the two purchases and refurbs. So, I have not put any further monies into the business (Ive put about £12k to date) as It has been my pot to live off. None of my remaining capital has been used for the purchase or refurbishment. The main reason for coming onto this platform with this question is for some honest opinion as we are meeting in two days to finally work out for our business how we are going to operate as a business moving forward. What is fair in a business of this setup? Although we are 50/50 shareholders, as I have no funds what would be a fair and sensible solution to running this business moving forward?  I would have thought that with no cash being put in by myself now has changed the landscape of how this can be a business that feels equal, for although I am operating as a full time director, which is the equivalent of a working salary I guess - this does not equate to the value of the capital my partner is putting in ( Just recently he has paid £60k plus 20K refurb) I just want to understand this from his perspective and not cause offence in our negotiations when we sit down and hammer this out. Also to just add, he already has a mate as an accountant, who I have not met and set up the company for this for us. I was advised to seek my own advice from an accountant which I originally did but things have changed. I also feel we should have our own new accountant for this business. He winces at this because of the cost, as his 'mate' is extremely cheap. What concerns me is I have no proof that I have worked in the last year, If our relationship were to breakdown, where would this leave me if I needed to demonstrate to a lender what I have been doing. Apologies for the length of this I just needed to set the scene!

    Thanks!

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    You raise common issues where matters are not fully documented. A shareholders agreement is ideal but there are other ways, Using lawyers to draft this can be expensive if you have not hammered out a very detailed heads of terms with drag and tag and good/bad leave provisions to name the obvious ones.

    Currently you have a company which owns a property. Do you have shares? I mean are they actually issued or just promised.

    i would document somehow for your own records what work you have done from a time perspective for the company as worse case you are entitled to a minimum wage.

    i can see why you are concerned. I would be too but chances are there is nothing wrong. It is also not uncommon for one party to provide the capital and the other to provide the expertise/labour. Obviously it’s down to negotiation but a good starting point is 50:50 once he gets back his investment and you get a worker bee salary. Remember the finance partner needs you as you do what he cannot.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Hi Stuart,

    Thank you for your thoughts. We incorporated and formed as 50/50 shareholders. So that's set in stone right?

    If we purchase properties moving forward it is hoped that when his funds run out we will be re-financing and going again. Some of the donkey work he is taking on, such as IT/WEB , ordering and sourcing fixed products such as kitchens and sanitary ware. tools etc as he is more experienced in knowing what is actually needed there. He also likes to at weekends go shopping and looking for things as he is office based and in a stressful job, so this is a pleasurable distraction for him. What I worry about is how my input into the business can be accounted for. In the development of the business, I have been at the desk all day every day, troubleshooting ( lots of issues with our holiday let managing) and sourcing, processing purchases etc. I wonder if his contribution thus far will cross over and remove my part of the business which is in the plan as research, project management and creative design.

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    If you have shares then you are fine unless you have bespoke articles which given him preferential rights. Your other concern is that he demands his money back and the company cannot pay so he repossesses. You can sort out your concerns through dialogue with him.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022