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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 11471
Experience:  I have been practising for 30 years.
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Please can I have your advise. I am a builder I have my own

Customer Question

Hello, please can I have your advise. I am a builder I have my own company, I am also a director of a property company 50% shareholder. I have done work on a property through my company (the building company) on the renovation project (property company), now the other director who takes charge of the finances say that because my building company go paid to do the work, which was labour only, my part of this labour only he is deducting from the possible profit shares, is this correct. As I believe that for the last 5 months I had no other way of earning a wage and the company was taking on the work and I included that labour cost in the building costs when I done a costing report. Please can you advise if I am in my rights to pursue the 50% of the profit when the property is sold.Thank you Andy and Tara Sutton
Submitted: 6 months ago.
Category: Law
Expert:  F E Smith replied 6 months ago.

Hello for clarification - who is the other director in relation to you?

he is saying that you have already been paid and therefore not due 50% of the sale is this correct?

Customer: replied 6 months ago.
Hello, thank you for replying. The other director is an old customer of mine who approached me to ask to go into business with him, there are four shareholders, him and his wife, and me and my wife he gets 51% and we get 49%. He is saying that because he paid the labour wage to the building company which is mine he will deduct that from the profit, but I have worked on this for 5 months so wasn't able to work for anyone else, the guy that works with me he is happy for his labour side to come out of the building costs but not mine. I went into this to try and change my families life style and as I have done all the work, I am now being told I am not entitled to anything so I need to know if this is correct.
Expert:  F E Smith replied 6 months ago.

Let me just get this right.

You have worked through your limited company of which you own 100% on the property of another limited company of which you own 50% and you have charged the 50% company through your company for all the work you have done?

Is that the situation?

Customer: replied 6 months ago.
my limited company A&T Brentwood has done the work for Bones and Sutton, and charge a labour fee of which isn't quite 50% but the partner Bones is saying that it isn't fair as at the end of it I would in theory receive 80% to his 50%.
Customer: replied 6 months ago.
Hi, this advice is for UK law, isn't it. Thank you
Expert:  F E Smith replied 6 months ago.

It is indeed UK law. The site is administered in the United States but we are based in United Kingdom.

I’m not quite certain what the problem is here because you have been paid for doing an amount of work for the limited company and therefore it doesn’t seem to matter whether you get paid by your limited company and your limited company gets paid by the 50% limited company or you work directly for the 50% limited company and get paid by that.

I can’t see what difference it makes whether your limited company invoices were £500 of labour (or whatever) or you invoice personally for £500 of labour (or whatever)

Am I missing something?

Customer: replied 6 months ago.
Hello, sorry i don't understand your response.I am asking if as a shareholder of Bones and Sutton am I still entitled to the 49% share of the profits, due to the fact that my company A&T Brentwood carried out the work and had to charge labour.Colin Bones is happy to included my subcontractors wages in with the building costs but shouldn't all the labour be included in the building costs, as I invoiced Bones and Sutton from A&T Brentwood.All I want to know if I am entitled as a director and shareholder of Bones and Sutton if I am entitled to claim the 49% at the end once the property is sold.
Expert:  F E Smith replied 6 months ago.

The short answer to your question is yes.

The two limited companies are separate entities.

The 50% company engaged someone else or another limited company in your case to do some work and that other limited company is entitled to be paid the full amount but it would cost to do the job regardless of who did it. Any profit that you get as a result of the eventual sale or whatever it is of the property stays the same.

That answers your question.

The fact that whoever they contracted to do the work was a limited company which just happened to be owned by you is irrelevant.

There is a potential conflict between the directors duties of the 50% company and your personal interest in your wholly-owned company but that’s a different issue than you are asking about.

Can I clarify anything else for you?

I am happy to answer any specific points arising from this.

Please take a moment to look at the top right hand corner of the page and rate my service by clicking one of the stars at the top of the screen. It’s important you use the rating service because that gives me credit. It doesn’t just give me a pat on the head! (Although there is an incentive scheme where the more five-star ratings I get, I do actually get a pat on the head! :-)) All you need to do is press Submit. Thank you.

If you still need any point clarifying, I will still reply because the thread does not close.

Best wishes.

FES.

Customer: replied 6 months ago.
please can you just clarify with a yes or no. As Director of Bones and Sutton Andy is still entitled to the 49% profit share, even though it was Andy then done the work through his own company and charged Bones and Sutton to do so. Thank you
Expert:  F E Smith replied 6 months ago.

I don’t know who the parties or what the names of the companies are. The limited company that did the work are entitled to be paid for the work.

The shareholders of the company had the work done will split the profits in accordance with the shares that the shareholders agreement say.

Whether it’s equitable or not would also come down to whether the other director had done any work or not, because the other director is still entitled to be paid for any work that he did if any.