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Thread: Equity split

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    Question Equity split

    Hi everyone, has been a while since I've been on the forum, I love being here unfortunately haven't had much time for anything. It's nice to see that you all are still here
    Of course I need some advice and I believe I can get the answer here

    So, an established company registered as a cc with only a sole member, it runs it's day to day business as normal, however the company decides to open a branch where they will be shares split between the current member and one or two more people who will only have shares in the new branch. The branch will operate by itself so assests, liabilities, income, expenditure will be limited to the new branch BUT the invoicing, banking, billing etc needs to be run through the current company for which the branch will pay a monthly fee. Will not work if a new company is opened as it has to use the structure, bee certificates, tax, wca, bank accounts etc. The question is how the new branch can have equity split between it's members while this branch has extra owners? A profit sharing aggreement won't work because there is no equity attached to it as far as I understand. Bottom line the new people need to ensure that they have this business on paper.

    What are the possibilities, would a holding company be the answer, what are the implications and so on? Thanking you in advance.
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    Diamond Member wynn's Avatar
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    A straightforward partnership with the cc as one partner and the other two people as partners all to the percentages agreed, an agreement saying who owns what, who does what and what gets done by the cc as far as admin goes.
    Obviously you will have to run a separate set of books,
    The only downside I forsee is that you are jointly and severally liable for debts in the new partnership so if it goes belly up and the others have no realizable assets the creditors will come after the whole cc.

    I would definitely compartmentalize the new business with it's own pty ltd even if you only use it to hold your shares in the partnership.
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    Diamond Member HR Solutions's Avatar
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    This question is exactly the same as myne on another thread, where we are opening up a branch in CT. We are off to see our bank manager this morning so hopefully will be able to come back with some clearer answers if you would like.
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    Site Caretaker Dave A's Avatar
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    As mentioned above, this challenge has already been recently thrashed in HR Solution's thread on opening a branch.

    I'm sure we'd all be interested in hearing a viable solution that delivers what you have been hoping for - but so far we've struck out.
    The trouble with opportunity is it normally comes dressed up as work.

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    Apologies for making pretty much the same post as one that exists.

    I must say thou I still don't have the answer I'm looking for. Profit sharing is definitely not the solution in this situation.
    ---There is no traffic at the extra mile---

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Nickolai Naydenov View Post
    Apologies for making pretty much the same post as one that exists.
    No worries. It's only when you get into the meat of each thread that you realise they share so much common ground.

    Just a comment here too: I'm not convinced all the new registration work required trumps the perfectly beneficial and sensible reasons for forming a separate company. Once the registrations are in place, I can tell you from experience doing two returns is not that much more demanding on your time than doing one single one that would cover all.
    The trouble with opportunity is it normally comes dressed up as work.

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