If your partner is a business owner, are you a director/ shareholder?

[KnobJockey]

I'm not married to my partner, but we have a joint mortgage, a 10 month old, both work and contribute to a joint account. Both of us currently own another property, mine is rented out, his will be sold to fund work on our joint property, at which point we will move my rented house to joint ownership.

DP is now looking at leaving work to become self employed. He will use our joint money to set up, purchase a van, etc, and no doubt things will be slow for a little while. I am a bookkeeper, so will no doubt be involved with invoicing and accounts work, which I expect my time will be paid for.

I'm just mulling over about whether I need a discussion about this me being a director/ shareholder. It is likely to have another partner, so he may want to discuss the situation too.

Anyone been in this position? Are you a partner in the business? Or a b shareholder? Not sure this is the right area to post either.

I haven't discussed this with my DP yet, I have more understanding of this type of stuff, so its usual for me to research first.

@PAND0RA we're not selling the property to fund the business, it's being sold for joint house renovations. I put that in there to show that we are both financially commited to the family unit. His savings have gone into renovating that previous property, some of that has also come from family funds but my savings were not used for that. Not large savings though, by any stretch! But all in my name.

Maternity leave was funded jointly, not from savings. I work 30 hours to his 40 hours, but then do some self employed work on the side too. I have until now borne the brunt of the baby side, however I have gone back to work in the last month and set the precedent already that I would not be the only one expected to cover childcare, etc. I'm aiming for a lot more equality on that footing. He's currently on a days holiday from work at home with the baby as our childcare wasn't available- as I would expect us both to do as necessary.

@PAND0RA as to why I'm taking the risks without the benefit- because the benefit could be ours as a family. I wouldn't expect him to reap rewards and for us all not to benefit, this could be an excellent move as a family.

@Justajot does it protect you if the marriage doesn't fail? lf that business was worth hundreds of thousands, would you be entitled to half of that if you divorced? That's my query really.

I appreciate it's a big deal, and we will seek legal advice, I just need to know what my questions are before we commit to anything that will cost us money.

[quote KnobJockey]@PAND0RA as to why I'm taking the risks without the benefit- because the benefit could be ours as a family. I wouldn't expect him to reap rewards and for us all not to benefit, this could be an excellent move as a family.[/quote]
I don’t mean to be harsh but there’s no such legal entity as “ your family”. He’s a single man and if he owns the company, you don’t benefit at all. Remember, he doesn’t want to be married , he wants to be seperate legally and financially.

He walks aways and takes it all with him. If you are funding some of it, become a shareholder. I don’t get why you wouldn’t.

It sounds like you are on the ball with the childcare. But running your own business can take over your life , so watch out that he keeps up his commitments to his child. I strongly suspect that you will end up

• doing the books for free ( there’s no chance you will get paid)
• doing his share of the housework and childcare

All because of his work.

People think that working for yourself gives you flexibility, but often you are swapping one boss for many clients / customers and all want to come first.

I’m not a director or shareholder of DPs limited company, he does have two other partners however so only owns a third himself. We have been together for 12 years and have two young DC. I have my own career but do help out with small admin type tasks occasionally for no pay. It didn’t require any investment except he used some of his personal savings to buy some equipment before they set up, around £5000 worth. We plan to marry in 3 years and have pretty much agreed that we will arrange a pre-nup preventing me from claiming a share of the company in the event of divorce, in return for him continuing to pay the mortgage whilst allowing me to keep 100% of the family home once paid off (house owned in joint names).

[quote TheSunIsStillShining]

OP given you are not married and have skin the game, so to speak, I would advise you have shares to protect your "share" of the investment.

You can leave the operations to your DP and his business partner but make sure you have rights to receive information such as management accounts (ie get more than just the annual accounts, which won't tell you much, esp if it is a small company) and get some minority shareholder rights eg they can't issue more shares without you agreeing, if they sell you have to right to sell alongside them [this is all from the perspective of you and DP not seeing eye to eye in the future/worst case scenario etc]

We are both co directors but purely for tax benefits, I have nothing to do with the business

@PAND0RA that's the question I asked at the start, should I be a shareholder/ director 😁

I understand there's no legal entity as a family, which is why things are structured so that if we split, we could walk away equally. I'm asking others opinions on the directorship/ share ownership, and so far there is a pretty equal split between those who are saying yes, even shares and no, don't take the legal risk.

You've said don't put your savings in, let him finance it. Can I ask your opinion if the business does become a success? Would you be on board with him not using the profits to benefit the family, as it was 'his' money that financed it?

No, I’m not. DH has his business, I have my job. I don’t need to be involved with his job too!

You are not a family when you are not married I am afraid but two separate entities for financial purposes. When you get married you will have the benefit of his share of the asset (the company shares) as being a marital asset. At the moment if you want any beneficial interest then you need to be a shareholder or partner. (A Director is merely an employee and does not denote ownership of a company).

You've said don't put your savings in, let him finance it. Can I ask your opinion if the business does become a success? Would you be on board with him not using the profits to benefit the family, as it was 'his' money that financed it?

When you say “ benefit the family “ I assume you mean paying his way In your joint home and supporting his child - exactly the same as you do with your wages, I assume?

Yes of course - that’s what’s adults do. It’s not doing you a big favour !

However you are confusing two things - the income that he takes from the business ( either as dividends or salary ) and the capital value of the business.

If you are not a shareholder then you have no Rights to or say in the company. If you are just a director, then you can probably be fired quite easily ( depends on your articles of association ) .

While he “ works in the business” , he’s building up value in it AND ( hopefully ) taking an income. If you don’t own any of it, you are simply taking an income when you do salaried work.

That’s not equal. It’s also not equal because I suspect you will end up doing work for free - either accounts work or his share of childcare / housework.

You will end up doing The accounts for free because he won’t have enough profit to pay both of you a wage. And you will decide it’s more ‘tax efficient’ for him to pay himself rather than you.

And you will end up doing his share of the childcare / housework because customers / clients will always come first.

The result will be that your work will be seen as having little value. Whereas he will be “ earning the money “ because customers will pay for what he does.

You will be building the business together so you should both own it. Otherwise you could give years of your life working in his company and he could just walk away and take it with him.

In your situation I would insist on 50% of the shares. Whether or not I took a salary for any work done would depend on how many hours and how much profit it was making. It usually makes more sense to take some dividends instead.

As to being a director, I would also do this but I’m aware of the legal responsibilities involved. As PP have pointed out, it’s not to be taken lightly.

This is my opinion based on 20 years of running a successful business and then selling it. And 16 years of being on MN and watching women and their kids get shafted.

[quote KnobJockey]@PAND0RA that's the question I asked at the start, should I be a shareholder/ director 😁

I understand there's no legal entity as a family, which is why things are structured so that if we split, we could walk away equally. I'm asking others opinions on the directorship/ share ownership, and so far there is a pretty equal split between those who are saying yes, even shares and no, don't take the legal risk.

You've said don't put your savings in, let him finance it. Can I ask your opinion if the business does become a success? Would you be on board with him not using the profits to benefit the family, as it was 'his' money that financed it?[/quote]
There is no legal risk in owning shares - apart from losing your shares (or rather the value in the company) creditors can't chase you for debts of the company etc except for EXTREMELY rare circumstances.

So seems to me it is better to have shares and have the potential risk of them being worth nothing, than having no shares in the first place.

@seasonfinale that sounded a bit rude, we are a family. Just because we are not married does not mean we are not a family.

I appreciate that at the minute we are seperate legal entities. I am covered in that sense, neither of us will profit from the other if our family was to break up.

I am asking others opinions in how/ whether to proceed with the ownership of the company, whether the risk of it is worth it given that the money we BOTH have in our joint account, earnt by both if us, would be used to help the business start, along with possibly my personal savings.

If I decide against becoming a director/ shareholder, then the money will be loaned to the business, with a formal agreement.

Just be a shareholder then, if you are worried about fulfilling your legal duties as a director.

Lending money to the company doesn't mean you own it. And if it’s not making money, you won’t get yours back. And If it goes to the wall you won’t get it back, unless you have it secured on something like a property, which I assume you won’t.

I work in company law. If your joint money is going into it you want to be at least a shareholder.

Whether or not to be a director is up to you, but it won't provide you with any rights over the assets of the company.

@PAND0RA no, I didn't mean paying his way in the home, he pays his way in the home now. I mean if the business is successful and his salary is increased, whether by a little or a lot.

I'm not trying to pick fault, I just felt like the way you worded it was as if what's mine is mine, and what's his is ours. That's not what I want in a relationship, whether married or not. I dont respect people who do that in a relationship, male or female.

As to whether the business takes over life, that's a different argument, and one I addressed when the subject of starting a business came up. I haven't been a director of a limited company, but I am a sole trader, he has been a sole trader, and I have a lot of close contact with directors at work on a daily basis. Some who take it seriously and some who don't! I am VERY aware of how much it can impede on life, and my first discussion at the point it was raised was how would it be compatible with family life. It's all a massive concern to me, but was not why I raised the thread- thank you for your concern on it though 😊

What I'm taking from this thread is if we do go ahead with this, then I may be wise to split share ownership with him but not become a director.

Any money i put in will be loaned with a formal agreement in place.

Thank you those who have had input!

@PAND0RA no, not against a property- I'm talking under 5k when I talk about my savings, we're not very flush! 😁

I see so many threads on here where one partner has 'hidden' money. Worked in a ltd company, taken minimum 'salary' etc. And if the couple split up there is bugger-all ongoing contribution to the family. Protect yourself against that situation.

[quote KnobJockey]@PAND0RA no, not against a property- I'm talking under 5k when I talk about my savings, we're not very flush! 😁[/quote]
If you are not well off then even more reason to protect your money.

You’ve had very good advice here from many posters but it’s clear to me that you’ve decided what you want to do and you are getting annoyed at people who advise differently.

I hope it works out well for you and your LO.

@PAND0RA Im sorry it's coming off like that, as they are genuine questions I've asked.

What is it I appear to have ignored? I know that there is a risk to starting a business, and a chance that any loan I/we make could go out of the window, even if a loan agreement made. I know that there is a chance it will affect our family life, but to be honest I haven't discussed our family life at the moment, or the impact that his current work has on our life. I am aware businesses can take over a life, as we have both been/ are sole traders.

The posters above seem fairly evenly split between no interest in his business, and 50/50 in case of a split. Those who have legal/ business knowledge have suggested protecting myself by not being a director unless I'm willing to take the risk of repercussions, which I have said is sensible 2 posts up.

So what I have taken from it is that if I want to be involved, be a shareholder so if he legs it I own half, and put it in the mems and arts that he has to provide more detailed accounts to shareholders so he can't hide money easily. Don't be a director in case he screws things up and I'm legally responsible.

I genuinely don't know what advice I've ignored on this thread other than don't do it as you're not a family, and it will ruin your home life. Both of which I addressed upthread as potential concerns that are part of a seperate discussion.

@venusandmars thank you, that's what I'm trying to do- have a discussion about how best to that. One suggestion was to have detailed management accounts made available to all shareholders written into the mems and arts of the business at the formation. Any other ideas as to how to protect against that?

But I suppose that same situation can and does happen to employees too- bugger all contribution to the household after a split.

@houstonspca thanks, that's probably what we will do 😊