Creating a Partnership

Now that I’ve found the money to become a partner it is time to set up a formal agreement. The company accountant offers advice on how to do this. He suggests that we each set up a holding company and gradually transfer the shares from Denize’s holding company to mine. He also suggests that we each take out an insurance policy on the other. Hmm, this is more complicated than getting married.

Here’s something new to learn; how to set up a registered company. At the government office we pick up the forms and filling them out becomes a task for the next week-end and includes specifying a financial year end. Then one evening we meet again with the accountant. He checks the forms and tells us about the next step; mailing the applications and wait to see if our name has been accepted. To make it more likely we both set up our holding companies with our own names plus Incorporated; mine is M. B. Davidson Inc. Once our names are accepted, all transactions now go through the two companies and we each set up a bank account in our new company name.

Next step is taking out life insurance, which the company will pay for. Because of the difference in age, Denize’s is more expensive and I am glad I don’t have to pay for it personally. A woman comes to the office to check us out physically and says that I’ll likely never have high blood pressure (a good thing when you work under stress a lot). Once the insurance is in place, if anything happens to Denize, I will receive the proceeds of the policy which will enable me to buy out her heirs. And the reverse works for Denize.

Now I legally own 30 percent of the shares in the company and any distribution of profits is paid directly to my holding company. It is time to set out my intention to purchase the remainder of the shares over the next four years, at which time Denize will retire. We have an efficient way for me to accumulate shares and pay very little income tax. Also I have the benefit of knowing that if anything happens to Denize the business will be mine.

Having a good accountant is a wonderful thing and I did not need to hire a lawyer, saving several hundred dollars. Everything is done properly and now we can get to work.