A friend is about to employ someone and with his small Ltd being strapped for cash, they've both agreed for some equity in the company instead.
How should this be handled, can the contract say that he is receiving this and this amount of money and this and this amount of shares each year?
Ideally Friend 1 want's to part with equity gradually - i.e after 1st year only part with 5% of the company etc and perhaps renegotiate after.
If Friend 1 withdraw x amount of dividends that year, this also means that Friend 2 get 5% of that amount too.
Anything to look out of in particular?
Any easy way to agree on the valuation? Let's say that the company is bringing in £80k per annum and thanks to Friends help will bring potentially up to 150k.
This helps when calculating salary/divis for this year, but not much in how much of a stake should Friend 2 get? There are existing business connections, retained capital etc how is this usually valued?
Finally will they still be friends in two years time ?
I know them both personally, they're good lads, but I fear such arrangements tend to break things... any tips on how to structure this so this is avoided? For example, Friend 2 receiving only 5% is much less exposed to the risk, perhaps it's better to structure his salary so that part of it is a bonus dependent on the performance of the Ltd?
Any tips from anonymous not lawyers and lawyers alike are warmly welcome.
How should this be handled, can the contract say that he is receiving this and this amount of money and this and this amount of shares each year?
Ideally Friend 1 want's to part with equity gradually - i.e after 1st year only part with 5% of the company etc and perhaps renegotiate after.
If Friend 1 withdraw x amount of dividends that year, this also means that Friend 2 get 5% of that amount too.
Anything to look out of in particular?
Any easy way to agree on the valuation? Let's say that the company is bringing in £80k per annum and thanks to Friends help will bring potentially up to 150k.
This helps when calculating salary/divis for this year, but not much in how much of a stake should Friend 2 get? There are existing business connections, retained capital etc how is this usually valued?
Finally will they still be friends in two years time ?
![Wink](https://forums.contractoruk.com/core/images/smilies/wink.png)
Any tips from anonymous not lawyers and lawyers alike are warmly welcome.
Comment