Mumsnet Talk

I have spent the last 2 months brainstorming and planning to set up a business with someone. At first, I was unsure of her intentions, whether she was just 'blue sky thinking' or serious, but we had a conversation, and she said she was serious, she wanted to go into business with me, and we started to plan for real. She is a great person for having ideas, and I am really good at tying ideas down and actioning them, so I thought we would be well-matched. The area in which we both work is hot news in our area at the moment, so I know all our ideas could come to fruition.

One reservation I have had was that she has worked in this field for a long time, whereas I am new to the field, although bring strong skills generally, which will be required. Since she has worked here, in this area, for years, she has many, many contacts, both locally and nationally, of which she is very proud. Everyone has heard of her and she is well-respected. I have always felt that this put her at an advantage over me, but she seemed to be fine about sharing her contacts with me and introducing me to them.
This week, it became clear that we need to take this to the next level. We visited a contact of hers who told us of many funding streams we could tap in to, but we need to establish what type of business we will be.
We both agree on being a social enterprise. I think we should be a business limited by guarantee, so that we can build and grow the business and employ others, in time. Employing others is what we have discussed and agreed.

The difficulty is that my 'partner' has now started to talk about taking on independent work whilst building this business. The independent work she will be taking on will be in the same field as our business (and could be commissions that the business could take). She wants to limit the scope of our joint business to a couple of her ideas, and follow her own leads to take on work independently if she gets it.

I don't think this can work. If we are going into partnership, I think it should be equal, and transparent, and all work should be done under the 'company' banner. I am concerned that, if she is offered 'independent' work, she will be doing that instead of working on our business, leaving me to do all the 'joint' work for her to benefit from. She has pointed out that I could take on independent work as well (I could, actually, make alot more as a supply teacher than this business will make, and have been offered lots of work, but have chosen to do this instead). I think if we both take on independent work we will never commit to the business.

I commend anyone who has finished reading this, thanks! Any ideas/views about what has happened? Why might she suddenly have gone off the boil? what should I do/say? Anyone had a similar experience to share?

She might just have cold feet. Or she might be suddenly thinking actually she'd be better off as a sole trader, if all the contacts are hers already. Do you need to remind her what you are bringing to the partnership and how you could enhance those projects she's creaming away form the company?

Have a long chat with her. Make a list of all your concerns and ask her to do the same. better to sort this stuff out before you commit than try to untangle it afterwards. If she's still cagey, it might not work long term.

Thanks, Racingheart, I think you are right. I have already suggested we each write down a list of our current projects, those we hope will soon be off the ground/potential earning streams, and those we wish we could get but don't yet have. I thought this might show her that we both have stuff to gain (and to lose!) by joining in partnership, and both have things to bring.

Ironically, I am the one doing all the paid work at the moment-she has no paid work but a couple of leads. It is these leads that she wants to keep separate. One of my most lucrative contracts at the moment is something she really wants to be involved in-and to take further than the current client. If things had carried on as we were planning, I would have been introducing her as my partner to this client next week.

Do you think there is any way in which her suggested model would work? Or should I just walk away now?

It sounds like her attitude is 'whats mine is mine and what's yours is ours'. This may not be intentionally greedy or selfish, some people just see things that way.

A partnership is not appropriate for this business; you (individually) would end up becoming entangled in things that she had taken on without reference to you.

Nor is a CLG appropriate - it is almost impossible to deal with the affairs of a CLG if/when things fall apart. A 'normal' limited company is the way to go, backed up with a solid shareholders agreement. If you really need to do something different to address your market, you could consider a Community Interest Company.

But TBH I think it sounds like she is someone you want to keep at arms length: would it work if you had a business that worked with her as a consultant on some projects?

MrAnchovy, you have really hit the nail on the head there with your description of her attitude-that is more or less what she said to me yesterday.

I have already experienced her going ahead and booking appointments, or telling people we have decided on things that she hasn't even discussed with me. I always tell her if I think she's overstepped the mark but I think she just talks to so many people, that she forgets what she has or hasn't said to me!

She also goes to many different people for advice. I like to do alot of research myself, and then choose one or two people who I think will know more than me to talk it through with. I am very discriminating about who I take advice from, and like to keep my cards close to my chest until I'm ready to make the step.

We're not well-matched, are we .

Ok.
MrAnchovy, can you give me some advice about companies, as I am getting very confused! I thought a 'company limited by guarantee' was a long way of saying 'limited company'. Would that be a good idea if I set out on my own? What is the difference between a not-for profit limited company and a Community Interest Company? Is there any where I can go (online!) to get an overview of different company set-ups and the pros and cons of each one?

Thank you for all your advice!

Having been at a seminar about CIC companies t'other night - they pretty much have to be non profit, and they are a CLG with added social conscience.

By the sound of it a bog standard Limited by shares will be the best for you.

Hi TalkinPeace, We are certain that what we are doing should be some form of NFP organisation-we have both come to this through a charity route,a nd the recognistion that there is work to be done in our field.

There is a fair distribuion of activity that will bring in funds, and work to be done with people who do not have the capacity to pay. We are keen to follow the 'social conscience' side of this,

I've been on Business Link and had a read there, but it doesn't give enough information about, for instance, the tax and NIC that each type of business will pay.

TalkinPeace, do you have any info from your seminar that could be sent electronically? I'd be grateful for any help!

Hiya,
It would out me utterly - which I'd rather not do at the minute!

Tax and NIC - same as any other business. You have employees, you handle PAYE for them.
You hit the VAT threshold, you pay VAT
you make a profit, you pay CT

have a look here
www.bis.gov.uk/cicregulator/

Charities of course are a totally different ball game : the trustees cannot/must not be paid by the activity - a bit of a bummer if you wish to retain control and there are HUGE implications for recoverable expenses related to exempt activities

Cooperatives - fine till the day the founder is voted out in a coup

Why don't you both work as sole traders with separate businesses for the first year or two and agree to join forces or help each other out on big projects where this would benefit you both? Sounds like you might both be happier that way. Agree a method of doing this, so you aren't hanging around forever wondering if a project will come off, only to learn it's been and gone. Draw up very specific plans on timings between pencilling and confirming a project, and get legal advice on simple contracts you can issue each other.

Then if you both find you work well, you can reconsider setting up a LTD together. If you don't, there's no messy separation to sort out.

Have you seen this page on Business Link which outlines the differences in the context of social enterprises?

I have sent you a message.

I think you are right, racingheart, that we are better off working separately. I certainly don't want to be in a partenrship with half a person, which is what she's talking about! It would be essential to agree on the amount of time spent on the project, though, and who would do what.

talkinpeace, am i right in thinking that a charity can pay the trustees so long as no more than half the trustees are being paid?
Also, I heard that CICs aren't elegable for many of the start-up grants and other grants for NFP companies. Do you know anything about that?

Thanks to you, MrAnchovy-I really appreciate it, and will reply privately.

no, trustees of a charity cannot be paid for work done for the charity
we get mileage for attending meetings
nothing more
otherwise we are not independent

CIC are just another form of Ltd Co
and frankly any business that cannot start itself without government / grant funding should not be nowadays
start then get extra - prove the validity and then get support

> CIC are just another form of Ltd Co

I'm not sure I'd say that - the permanent asset lock is a fundamental difference.

Other sites that may help (the OP and others):
www.socialenterprise.org.uk
www.communitymatters.org.uk
www.can-online.org.uk

yup, the asset lock is different but all other tax and reporting implications are the same

Just wanted to come back and say thank you to everyone who gave such fantastic advice on this thread.


My friend and I have had some good conversations this week, and had some excellent guidance. We have decided to go ahead as two sole traders working together for now, but to make a decision on legal structure when we know more about how much work we are getting.

Mr Anchovy , I have PM'd you.

Amistillsexy, I think the decision you have reached is a good one. I had a very bad experience setting up a business with someone and will NEVER do it again! My FIL also owns his own business and warned us from the start that if you can do it on your own, do it! We didnt listen and got our fingers well and truly burnt so I think you are right to go ahead as 2 sole traders and see how it pans out. Really really good luck with it xx