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Sole trader Incorporating with 50/50 shareholding

Incorporate and sell 50% shares

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Hey all

Just need a bit of guidance to ready up on the subject.

A client would like to incorporate his sandwich business with a friend as 50/50 shareholders. The business is valued at £20,000, all goodwill no assets.

What would be the best way to incorporate? Just ordinary shares £50 each with DLA or it would be beneficial to have 10,000 each ordinary/redeemable/preference shares? Or I am just making is complicated..

Thanks

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RLI
By lionofludesch
18th May 2020 15:46

Why does the friend need a £10000 in free shares when he's introduced nothing ?

Does he have that money to pay to the former trader ?

A bit more detail on your reasoning, please.

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Replying to lionofludesch:
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By iamtrainee
18th May 2020 16:00

lionofludesch wrote:

Why does the friend need a £10000 in free shares when he's introduced nothing ?

Does he have that money to pay to the former trader ?

A bit more detail on your reasoning, please.


Oh sorry for the confusion. I only mentioned the friend to show that he is not a family member.
Yes the friend/business partner is paying 10,000 for the share to the owner. so no the share are not free.
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By Matrix
18th May 2020 16:58

Why are they incorporating? Limited liability or another reason?

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RLI
By lionofludesch
18th May 2020 17:44

OK - well, you can do this if you want but £10,000 apiece seems a lot of money to tie up.

Why don't they have a more modest share capital and lend the company the rest of the money it needs ? Then they can have it back when the company's in a position to repay it.

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By WhichTyler
18th May 2020 20:13

Don't forget the shareholders agreement, so you don't end up back here with a 50:50 deadlock question...

Thanks (1)
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By frankfx
18th May 2020 22:01

Are you a trainee?
With a client?
Or is it employer's client.
Why not brain storm the possibilities with a senior or your boss.
All part of your practical training.
Have a look at the office research material.
Have a look at other client case studies.

Then posit the proposed solution with us , we can then critique the solution.
It may help.

Share holder agreement important.
Even just discussing elements of an agreement would signpost client to serious business issues.
Clients need to realise that you are not just a bean counter, and that you can bring business acumen to the table.

That may help them grow a business.

Share capital with £10,000 lock- in, seems like a school boy error. As hinted in other answers.

Though the _£ 10,000 loan may also be locked_ in for practical reasons, it is a more flexible lock and easier to unpick.

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