New Business/Investment - Not Sure Where to start

[valley]

This year I have started to make money online. I build websites and make money from them.

I have a friend/associate in India that has a Hosting company and they want me to invest money in new servers in the US so that he can sell them as hosting to people from his website.

Initial investment is about 700 euro each and then we would pay a lease on other parts of the hardware for about 2 years until we have payed it off. So initially for the first 2 years the profit would be small and when all the hardware is paid off we would make more.

The plan is that as we make money we re-invest it into more servers. And as I am Irish I can get access to a VAT ID and that means I have access to buying European servers outright instead of leasing over 2 years so I could buy them cheaper for us.

I am a Paye Employee, I do not have a company setup. I know I will need to submit returns for earnings that I am making online this year. I am re-investing some of my online earnings into this venture.

So I am pretty unsure where to go with this. Do I setup a company? Do I just pay profits on tax I earn from the hosting company? How do I protect my investment if things go bad between myself and the person in India.

 

[Purple]

I can't help on the set up side but this should be an interesting thread.
Do you know what period you can devalue the servers over?
Are you insured if a client sues you because their site goes down?
If things go bad with you and the guy in India you just have to take it on the chin. You aren't going to take a civil action through an Indian court so just forget about that idea but act knowing you have no real recourse.

 

[MrEarl]

Must admit, the protection and structure around a limited company and buying servers closer to home at a better price would both appeal to me....

Could the servers be run from Ireland without any technical restrictions and on a cost efficient basis etc ? ... if so, that also gives you the feeling of a little more control.

I know €700 per person is not significant outlay and there are obvious costs with setting up and maintaining a limited company - but I would still want to go the limited company option.

 

[valley]

Must admit, the protection and structure around a limited company and buying servers closer to home at a better price would both appeal to me....

Could the servers be run from Ireland without any technical restrictions and on a cost efficient basis etc ? ... if so, that also gives you the feeling of a little more control.

I know €700 per person is not significant outlay and there are obvious costs with setting up and maintaining a limited company - but I would still want to go the limited company option.

No it can't work like that. He has this business for the last few years and it is growing. He has bought Servers in the USA and then he sells US hosting. If things go well then we will buy Servers in Europe. ie Germany and sell German hosting. That is the business model he has and he has slowly built it up over the last couple of years and it works well. So you buy the servers in ie France and they are held in France and you sell French hosting

700 euro would would be my investment in the USA servers 50/50 investment. Then as we make more money we invest more money. It's just a complicated situation and I have no idea how to go about it as I have no real background in setting up a company. But I do know that it is a great opportunity for the investment I need to put in. He needs a partner.

 

[MrEarl]

Well, if he needs a partner and you know him a while you must have some level of confidence in him.. assuming €700 would not break you, then I'd go for it

 

[aristotle]

Why does he want a €700 investment? Surely he doesn't actually need the money so is this based more on two friends doing something together rather than needing the cash?

What kind of returns do you expect? It just sounds like too small.

 

[Leo]

This all sounds a little dubious to me for a number of reasons.

First of all, why buy servers when you can use one of the big IAAS providers that can leverage massive scale to provide the infrastructure needed to handle the traffic at a fraction of the cost? Buying hardware at this small a scale, you'll never compete with the big hosting providers on cost or service. As more and more large enterprises move to cloud service providers, it makes less sense for smaller players to buy and maintain their own infrastructure.

Then, €1400 doesn't buy you much in the way of hosting infrastructure. Where are these being hosted and who is being paid to rack/configure them? What kind of connection to the web are they on? What are the ongoing maintenance and hosting costs? If you're hosting other people's websites, how are you handling resiliency, fail-over, backups, support?

To buy servers in France just to provide French hosting, and then go buy more in Germany to provide German hosting makes no sense. The latency between France and Germany isn't that great that you can't host them all from the one set of infrastructure.