Business Idea - Need Direction...

narcissism

To cut a long story short.
My Brother is a tradesman.
Set up a small business 2 years ago and its doing well.
I'm in IT and have helped him all along the way with his IT setup etc..
He has never tapped into the potential of internet sales.

I've proposed setting up an internet site, and any sales that come from it I would take a cut.
What is a good set-up for this arrangement (We're good friends by the way).
Should I set up a business and get him to do the work that is ordered?
OR should I set the website up under his business name and take a percentage of sales?
Or any good business ideas out there??
Thanks!!!

stepbar

narcissism wrote:

To cut a long story short.
My Brother is a tradesman.
Set up a small business 2 years ago and its doing well.
I'm in IT and have helped him all along the way with his IT setup etc..
He has never tapped into the potential of internet sales.

I've proposed setting up an internet site, and any sales that come from it I would take a cut.
What is a good set-up for this arrangement (We're good friends by the way).
Should I set up a business and get him to do the work that is ordered?
OR should I set the website up under his business name and take a percentage of sales?
Or any good business ideas out there??
Thanks!!!

Why not go into partnership with him? setup a limited company and give it a go? It would prob best to leverage the existing name / reputation of ur bro's company so I would suggest that you would setup the website based on his trading name. But remember the name of the website is important from a marketing perspective, something that is catchy and easy to remember is always best.
What other skills apart from the IT can you bring to the table? Marketing, Sales exp etc? BTW was trade is ur bro in? and what are you goin to be selling!

narcissism

He is already in partnership with a limited company, although his partner is basically a sleeping partner at this stage as he has a full time job so My brother does everything. Bascially I do all his IT work set up equipment etc..
He always spoke about us getting into something together, but I just dont have the time with work.
The web is the way to go for me as I could do all the initial work of setting up site and marketing the company that way, and then take the business through the website and pass it on.
Basically he is in the sign business and I believe there is huge potential for it to bring in business off the web if it is marketed the correct way.
I spoke with him about it and he is really on for it, but I'm not sure what is the best way to do it. Maybe set up a new ltd company by myself and get him to do the work? OR set up a new limited company with both of us, but I dont want to undercut his other partner as he is also related (not close) and they are good friends.

stepbar

Ok that changes things a little what I would be inclined to do so in that case is setup a limited co. So basically XYZ ltd (lets say ur bro's company) takes a share in 123 Ltd (the company for the website), the perentage share you can trash out amoungst urselves. Mite be best to retain a minority share (20 - 35%??), at least u would have some say over its future direction, who knows what could happen down the line, you mite decide to start selling other related products that would complement ur bro's signs r it could become a full time business for you. Go off and create the website (123 Ltd would pay you to create the website that way you could draw up a simple contract stating that the copyright to the website would be personally urs), and use 123's resources to market it etc. As I have said make sure in any contract that you explicitly state that you retain the copyright to the website (who knows if you did a good enough job you could sell it to other companies as a solution / web shop etc).
By doin this it would ensure that if 123 was losing money then it wouldnt necessarily impact ur bro's co as well (because each limited co is a seperate entity and liable for its own debts, if things went belly up ur bro's co should be safe (I think I'm rite in sayin that? if anybody can clarify that it would be great) ).

From there you could hand over the website, retain a share of the profits from it and potentially sell ur solution to other companies !

narcissism

Thanks Stepbar- thats the advise I've been looking for!!
I think I'll go that route alright.
Can you tell me - Do you think I would qualify for a grant to set up the new limited company? what is the best way to go about that?
Akso - would it have any impact on the fact that I am already working etc... how does that side of things work? I guess I just declare tax as a single income or would I need to pay myself from new company etc...?

stepbar

narcissism wrote:

Thanks Stepbar- thats the advise I've been looking for!!
I think I'll go that route alright.
Can you tell me - Do you think I would qualify for a grant to set up the new limited company? what is the best way to go about that?
Akso - would it have any impact on the fact that I am already working etc... how does that side of things work? I guess I just declare tax as a single income or would I need to pay myself from new company etc...?

Ur local Enterprise board mite grand aid u but I think that ud would have to be creating a few jobs before you get would get any significant funding and I would imagine that you would have to have a fairly detailed business plan. http://www.basis.ie is a good place to start for info like that. Not sure about Enterprise Ireland I think their strategy now is to invest high potential start ups and there's a lot of conditions attached to grand aided money. I would be looking going looking for money for ur bro's company instead

On the other point, because the company is a legal entity it is responcible for its own tax (Corpo Tax @ 12.5%). That would be charged first and wat is left over can be used to pay a dividend. Paying a divident to ur bro's co you not be charged extra (I dont think, but a good accountant would sort that one out) Drawing down money from the company yourself would be taxed at 20% r 42% depending on how much you earn, the money u draw down is ineffect another income and so would be taxed accordingly. No point in doing that, waste of money. My advise would be to reinvest the money keeping it in the business r alternatively using ur share of the profits for "Expenses" that you may have (but u have to be very careful doing that... cause if ur audited u could get into serious trouble). Hope that info is of sum help.

antoinolachtnai

If you want my suggestion, I wouldn't be setting up any companies or getting involved in any equity. The reason is that you would really need a shareholders agreement to make the whole arrangement hold water, and that is expensive and boring to establish.

Just make a deal that you will set up the website and that he will give you x percent of any sales arising, or y percent of the gross profit on any sales arising. Put a term on the arrangement and an agreement on what will happen if you decide to call it off (i.e., who will own the domain name, etc.)

Then you just send him an invoice at the end of every month.

If the business grows like crazy, then you might find you need a more sophisticated arrangement.

Keep things as simple as you possibly can.

stepbar

I disagree, i wouldnt say 300 - 400 quid to be "expensive" you can practically buy them off the shelf (there's a company on Dame St who do exactly that, where you buy a off the shelf company). Of course it would be boring to people who arent interested in business, but it has to be done to protect the interests of all, anyhow how when its done tru a company no questions can be asked. TBH there's no harm in setting up a company, its good experience. After all we are trying to encourage a culture of entrepreneurship in Ireland.

antoinolachtnai

Yes, you can buy a company off the shelf for EUR 250. You can't buy a shareholder's agreement for that.

But a company with standard Articles won't give the kind of security you think it can. You need to explicitly state the agreement with a strong shareholder's or joint venture agreement.

Why does it matter? Well, because without specific protections, it is likely that the majority shareholder can largely sideline the minority shareholder at any point, either by issuing extra shares or appointing extra directors. If this happens and there isn't a strong shareholder's agreement in place, the only real option is to take an action for the oppression of a minority interest. In practice that won't work, because (a) you would be in the high court for days and (b) i don't think anyone has ever won an oppression case.

By all means the OP should set up a limited company for his own protection, but I can't see that it is worth his while setting up a joint venture company for a small, simple project.

fintan

Why don't you keep it simple and just invoice him for the work done in setting up the website and maintaing the internet advertising programme?

narcissism

I suppose I'm starting to think that "Keeping it simple" is probably the best way to go to start with. He is my brother and we're good friends, so if anything was to grow from it, then we could cross tah bridge if needs be.
I guess for now then, I should just go ahead and by the domain and work on the marketing and getting the business in, and arrange a cut of the profits with him on each Job I send his way.
I guess I would be better setting it up in his companies name then?

antoinolachtnai

Well, it's whatever suits. It is worth stating something in a letter.

But basically if he is carrying the external costs, he should probably own things like the domain name. But it's up to you.

I would rather have some sort of agreement up-front on what the cut of profits would be! (It is important that you have a realistic understanding of what his costs are in his business.)

The main thing is not to have any surprises down the road. I wouldn't worry about the money, you can always get more of that if you need to The important thing is being as straightforward as possible in your dealings with each other.

Good luck with it!

narcissism

In practice, (and I'm not into tax avoidance) what is the best way for me to work it so that I take max profits?
Say for example If he does a job for €580 and I take €80 as my profits(I am also on a working salary).
Then is it best for me to bill him for each Job (and to do so do I need to set up a company?)
Or should he just employ me? - it doesnt sound like rocket science but can't get my head around the best way accounting and taxation wise for him to pay out the profit and for me to maximise on it.

antoinolachtnai

I would just invoice him. You don't need to set up a company.

The most realistic way to minimise your tax bill is to keep track of your day-to-day expenses on this project, and your capital costs, on things like computers.

My view anyway, might be worth asking an accountant.

Antoin.