Thinking of Buying into a Business

K

kathryn

Registered User
Messages
42
I am considering buying into my brother's Business. He's in entertainment is very sucessfull here in Ireland and has opened up a strong following over the last three years in the UK USA and Austrailia. Recently he aquired all rights to his material which gives him quite a volume of product for the new areas he's touring.

He and his wife currently run the operation as Sole Traders. I have worked closely with him for 20yrs. They are now going to trade as a company and have a number of investors @50k. Most of the other investors just want their invetment plus a % back in 2/3 years. However I would prefer to get Shares in the company.

Could someone please answer the following for me:


How does a conpany decide on the number of shares in it? How would the company decide on the share price?

Many thanks for any help
 
It is very complicated and is a matter of negotiation between the issuer of the shares and the buyer.

Forget the number of shares, that is not really relevant.

What percentage of the company will you be buying? Will you get 10%, 20% or 33%?

To determine the price, you have to first determine the profitability. Will the company be making profits? A formula has to be agreed for the salaries of the directors and employees as otherwise, they could declare the entire profits as salaries and so you would own shares in an unprofitable company.

What are the growth prospects of the company?

Why do they need finance?

In general, it is not a good idea to buy shares in a privately owned company. You have few rights and it is very expensive to enforce those rights in the High Court.

You will find more here , but as Clubman says, speak to an accountant before you do anything.

Brendan
 
Thanks for the response. I have an appointment with my accountant next Tuesday. Regarding the questions you ask .

I really don't know what % I would be buying.

The growth prospects are based on how sucessfull my brother may be in the new territories he's touring. So far the US is looking good with PBS (tv network on board) and a spring tour in place.

The objective is to develope the new territories which have proved very profitable even on the smaller scale we have pursued upto now.

Getting ownership of the original material ,which though a costly exercise was an essential one to enable us to earn a good return .

What I would ideally want is to invest the 50k in a way that I could get a good return on it longterm. I don't need it payed back in 2/3/5 years. I'd prefer to have a return and some stake in the Artist/product. I just don't know what the best route to achieve this is.

Appreciate your help
 
You must log in or register to reply here.
Back
Top