Re: Arctic Systems win!!

"Tim" wrote :
NO! - If he has done (say) 1000 hours of billable work
at (say) £250ph, but only paid himself a low salary of
(say) £10K, then the Ltd Co could be worth around £240K.

This is very similar to the position where the Inventor
worked for little (or no) money creating the IP, then
sells the Ltd Co with the value from those IP rights.

"Tony Bryer" wrote
... Your first example is unrealistic is that the norm is just to
pay out all the income received, but largely as dividends...

Agreed. In both cases (of Consultant & Inventor) the norm
would be to pay out the income as received. For the Inventor,
though, the income (from those initial 1000 hours work done) is
received over a period of time (while royalties are received). I
agree that Consultants would normally be paid as they do the
work, but what if the contract between the client and the Ltd
Co allowed for payments by instalments, over a period of a few
years after the work had been done (which makes it even more
like the situation of the Inventor)? Would you let the Consultant
take the income as dividends without payment of NI then?

"Tony Bryer" wrote
... But even if not the company income is directly
related to work done; when the principal takes
a holiday or retires the company stops earning.

It's exactly the same with the Inventor & IP. The royalties
are simply "delayed earnings" - they were *earned* when the
Inventor created the IP, it's just that they are *received* later.

When the Inventor stops working, no more IP is created.

[Even though the earnings from the existing IP
continues to flow for a while, all that was actually
*earned* earlier. It's just delayed payment...]


"Tony Bryer" wrote
The risks he is taking are really no different to those of any casual
worker - not being paid, no work next week. On your figures the
company may be worth £240K but that's all it will ever be worth
if you buy it and put no further work.

Yep, and if the Inventor's IP is only worth £240K
(from future receipts of royalties, being delayed
payment for previous work) then that's all the Inventor's
Ltd Co will ever be worth, if no further IP is created.

"Tony Bryer" wrote
In the second case, the principal has done his 1000 hours work
with no guarantee of any income (assuming here a speculative
project). And if you buy the company you get a right to the
continuing income from licensing patent rights or whatever. So
they are, IMO, genuine profits and not disguised remuneration.

So you think it's the *guarantee* of payment that makes NI
payable on the Consultant's earnings? Then why does the City
slicker have to pay NI on his bonuses? None of the bonuses
were *guaranteed* when the City slicker did the work earlier
in the year. You might say the work was done speculatively,
in the *hope* of receiving a big bonus at the end of the year.
But they are all related solely to genuine profits...


.

Relevant Pages

  • Re: Investor Education
    ... How to calculate your cash flow statement? ... Lets us now get to know how to improve your net worth. ... Cashflow statement is nothing but a measure of how much money is ... down the monthly income and also list down the annual estimate of your ...
    (misc.invest.stocks)
  • Re: The Million $$
    ... it is really not worth it. ... could not retire on that kind of money. ... income for a lot of these people. ... money along the way, paid appearances, endorsements. ...
    (alt.tv.survivor)
  • Re: population sizes for colonising a planet
    ... >> much less than a million dollars, but should be worth almost a million ... >> times to someone with declining marginal utility and many millions. ... Bill Gates' income ... You implicitly were considering altruistic benefits and marginal ...
    (rec.arts.sf.composition)
  • Re: Arctic Systems win!!
    ... IMO the two are completely opposite. ... unrealistic is that the norm is just to pay out all the income ... worker - not being paid, ... company may be worth £240K but that's all it will ever be worth ...
    (uk.business.accountancy)
  • Re: press pot vrs aeropress
    ... But personality of the inventor doesn't sway me ... recommended brew temperature, some lame reasons are given about the ... It also costs more that I felt it was worth. ...
    (alt.coffee)