New business venture agreement - help!

[Magenta2020]

Hello, thanks for taking the time out to have a read of my thread. I'm in the process of setting up a new business with someone. We've been working on the venture for quite some time, and would like to formalize the arrangement. However, I'm not sure as to what mechanism would suit us best. On the one hand the obvious choice would be to register a limited company and be a shareholder and on the other hand I feel setting up two separate companies and having a joint venture, with my limited company having shares in the person I'm working with's business entity. Although I'd have a sizeable share, i'd nonetheless have a considerably less share than my partner. I may not necessarily be involved in the day to day running of all the projects the business would be involved in. My primary objectives are to have full say in the key decisions of the business I or my legal business entity would have a share of and most importantly, protect myself from any liabilities associated with the person I'm working with, in the event of him or anyone else doing anything that may be illegal (either now or in the future). We envisage the work to last at least 5-10 years. Your input would be much appreciated.*

[jaguarsuk]

You don't both have to set up limited companies and then use those to share the equity in the joint venture, your business partner could have their shares directly in their name on the joint venture and you have a limited company hold yours.

There's no right or wrong answer, just comes down to what suits each party.

What I would check is tax, specifically around dividend payments to the limited company if you were to set on up to hold your shares. Dividends would be paid after tax from the joint venture, but then appear in the books of your holding company making that then liable to corporation tax before you realising what dividends you can then take out for you from the holding company. You'd then pay further income tax on the dividends you take from your holding company. If you were to have your shares directly in your name in the joint venture you would only incur the income tax on dividend payments.