Best Structure for New Business?

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NickT29

Member
8 July 2014
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Hi guys,

I am currently trying to set up a new small technology business where I will own the majority, however my contract will be taking a percentage of the business. What is the best business structure to set the business up as under contract law and commercial law?
Your advice would be greatly appreciated!

N
 
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John R

Well-Known Member
14 April 2014
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Sydney
Hi @NickT29,
By contract, do you mean a contractor to your business or something else?
 
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DennisD

Well-Known Member
11 July 2014
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Hi NickT29

I second John R's query as to what you mean by 'my contract will be taking a percentage of the business'. Please clarify when you have a moment.

Speaking only in general terms from my past experience, the majority of start up technology companies register as proprietary companies (Pty Ltd), the mainupsides (among others) being limited liability for shareholders, transferability of ownership, tax rates and raising capital, but the downsides being more red tape and costs. Often it is enough to insert certain clauses into the subscription or shareholder agreement and/or company constitution to give effect to the specific commercial arrangements.

Hugh
 
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Tim W

Lawyer
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28 April 2014
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If it's just you and another guy, and not set up as a corporation,
then it's more likely to be a partnership than anything else
(even if the partnership is proportionate rather than a simple 50-50).

If it's you and a contractor (why?) and not set up as a corporation,
then it's more likely you are a (by default) a sole trader.

Why would your contractor being taking a percentage
(unless that percentage was the way to pay the agreed fee)
and not be some sort of equity holder (eg partner, shareholder)?