[Carl2009]

Say you have a small, thriving business and operate as a sole trader. You make above average income for the area in which you live. You want to retire.

You could sell the business but who has the money to pay for it in these straightened times. I was thinking that rather than taking on other people as employees (which seems an almighty headache from what I read on here) you could form a limited company, retain 51% of the shares, take, say, a salary of x% of the profits and let the 49% shareholder have the balance of profits. They would therefore have a ready-made livable wage, the incentive to work hard and build the business and you'd have a pension. You'd also retain control of the business, yet the other shareholder would have a stake that took his contribution to the business seriously. Maybe you could start someone off as a Director on a salary and a share purchase scheme - 10% share given after 12 months, with additional options to purchase from you tranches of shares annually.

Has anyone done this or similar?

[richard jagger]

I will tell you the secret of business with a partner. The working partner must always earn more and have a bigger share.AS he needs to be more motivated and will resent having a partner having more say and power on the future running of the business.He will also resent working hard and the sleeping partner earns more than he does.

[Pete10]

...that's called an earn out, this is where the owners are paid down over a period of time. Sounds a good idea especially when capital is so rarely available these days, doubt you'd have to be so formal as to issue shares etc as they would not be free-trading, so the structure set up to govern them would be needlessly detailed and overcomplicated. Its a good idea to offer a staggered exit as the entry capital for the buyer would be smaller than a wholesale buyout, also he is motivated to grow the business as he owns progressively more of it over time.

You could also seperate "ownership of the business" from "ownership/ rights to earnings". This can be achieved with a golden share arrangement, you hold one share that controls the voting rights to the company but you split the earnings rights however you choose, probably would be more like 70:30 / 60:30 unless you were still contributing to the business in terms of sweat equity (hours on the brush) for which you would expect a bigger share of earnings.

[Carl2009]

I'm a few years away yet I hope but might go down this route. Thanks Pete.