New company or use existing
Discussion
My other half is looking to set up her own business. To start with she will be working from the same offices as myself (I too own my own business).
What I am wanting to know is the best/most financially beneficial way of her setting up. Would it be better for her to set up a brand new company, etc, etc, or would it be better to change my company so that it encompasses hers, and have us both as shareholders.
The two businesses are not in the same fields of work, hers being Marketing & mine being Construction/Engineering.
Obviously I'm going to speak to my accountant, with regards to this but thought I'd give you lot a go first.
Cheers.
What I am wanting to know is the best/most financially beneficial way of her setting up. Would it be better for her to set up a brand new company, etc, etc, or would it be better to change my company so that it encompasses hers, and have us both as shareholders.
The two businesses are not in the same fields of work, hers being Marketing & mine being Construction/Engineering.
Obviously I'm going to speak to my accountant, with regards to this but thought I'd give you lot a go first.
Cheers.
The advice usually given is to start out as a sole trader/partnership before incorporating the business into a company, unless there are liability issues which justify setting up as a company from scratch.
The reason is tax. Any decent accountant or lawyer should be able to give you the advice you need.
If your wife's business is incorporated into the existing company then you will probably need to amend the articles and memorandum for your company.
The reason is tax. Any decent accountant or lawyer should be able to give you the advice you need.
If your wife's business is incorporated into the existing company then you will probably need to amend the articles and memorandum for your company.
The advice usually given is to start out as a sole trader/partnership before incorporating the business into a company, unless there are liability issues which justify setting up as a company from scratch.
The reason is tax. Any decent accountant or lawyer should be able to give you the advice you need.
If your wife's business is incorporated into the existing company then you will probably need to amend the articles and memorandum for your company.
The reason is tax. Any decent accountant or lawyer should be able to give you the advice you need.
If your wife's business is incorporated into the existing company then you will probably need to amend the articles and memorandum for your company.
From a practical perspective 
will you wife need any credit from suppliers, loans or HP for equipment?
If you buy items from a supplier on 30day terms, they will credit reference you. A ltd company with +ve accounts at Companies House will always look more attractive than a sole trader with zero trading history.
My new company is run as "Company B" Trading As "Company A Ltd". It uses one set of accounts, one accountant and I can offset any losses that Company B makes against profits of Company A - which is important with a startup business.
Edit to add:
With respect to the answer by Stella Star about 2 different trades, I would beg to differ. In my case Company A is an IT Consultancy and Company B is a vehicle repair company. I am about to file my 2nd set of accounts with this structure and I have encountered few issues.
>> Edited by apguy on Thursday 12th August 11:19
will you wife need any credit from suppliers, loans or HP for equipment? If you buy items from a supplier on 30day terms, they will credit reference you. A ltd company with +ve accounts at Companies House will always look more attractive than a sole trader with zero trading history.
My new company is run as "Company B" Trading As "Company A Ltd". It uses one set of accounts, one accountant and I can offset any losses that Company B makes against profits of Company A - which is important with a startup business.
Edit to add:
With respect to the answer by Stella Star about 2 different trades, I would beg to differ. In my case Company A is an IT Consultancy and Company B is a vehicle repair company. I am about to file my 2nd set of accounts with this structure and I have encountered few issues.
>> Edited by apguy on Thursday 12th August 11:19
apguy said:I think you've got it slightly wrong there.
My new company is run as "Company B" Trading As "Company A Ltd".
If Company A Ltd. is your current limited company, and Company B is your new venture, then it is "Company A Ltd. T/A Company B"
You can also say (on your website / emails / headed notepaper / etc.) "Company B is a trading name for Company A Ltd, registered in England #123456".
apguy said:
From a practical perspective
If you buy items from a supplier on 30day terms, they will credit reference you. A ltd company with +ve accounts at Companies House will always look more attractive than a sole trader with zero trading history.
My new company is run as "Company B" Trading As "Company A Ltd". It uses one set of accounts, one accountant and I can offset any losses that Company B makes against profits of Company A - which is important with a startup business.
Edit to add:
With respect to the answer by Stella Star about 2 different trades, I would beg to differ. In my case Company A is an IT Consultancy and Company B is a vehicle repair company. I am about to file my 2nd set of accounts with this structure and I have encountered few issues.
>> Edited by apguy on Thursday 12th August 11:19
To stop confusion I am referring to company a having 2 trades. Company A as a single legal entity will prepare a single taxreturn encompassing both trades.
But legally you cannot set losses of one trade against another. If you have been doing this and the Inland Revenue track this - the penalties can be huge not to mention a potential fraud or negligence case.
Maybe you haven't had too many issues but it is something that is always advised against. Then again this may be more of an issue with larger companies?
Cheers for replies.
Credit ratings would not be an issue. I have only ran my own business for 13 months & haven't really bought that much anyway.
The main reason I was contemplating the Comp.B a trading Division of Comp.A route, was that all account would be encompassed together, etc (or would they ?).
Speaking to accountant later in week, etc, so I'll see what he advises.
Credit ratings would not be an issue. I have only ran my own business for 13 months & haven't really bought that much anyway.
The main reason I was contemplating the Comp.B a trading Division of Comp.A route, was that all account would be encompassed together, etc (or would they ?).
Speaking to accountant later in week, etc, so I'll see what he advises.
Without wishing to labour the point:
To stop confusion I am referring to company a having 2 trades. Company A as a single legal entity will prepare a single taxreturn encompassing both trades.
Thats what I'm referring to, Company A Ltd is the legal entity and is one company, it just so happens to have another "branch" called B.
But legally you cannot set losses of one trade against another. If you have been doing this and the Inland Revenue track this - the penalties can be huge not to mention a potential fraud or negligence case.
I not sure who advised you of this, but this is incorrect. I could have a limited company called "Apguy Glass and Walls", just because one day I put in double glazing and the next day I build brick walls doesn't prevent me from treating all income and expediture as one pool of funds.
In my case I have a limited IT firm that writes software but also I repair vehicles (with 16 staff).
Maybe you haven't had too many issues but it is something that is always advised against.
We even had a VAT inspection (which is massively different from a VAT investigation) and this scenario threw up zero problems.
Then again this may be more of an issue with larger companies?
Well on my turnover of >£1mill per year, I guess I must be one of the smaller companies
To stop confusion I am referring to company a having 2 trades. Company A as a single legal entity will prepare a single taxreturn encompassing both trades.
Thats what I'm referring to, Company A Ltd is the legal entity and is one company, it just so happens to have another "branch" called B.
But legally you cannot set losses of one trade against another. If you have been doing this and the Inland Revenue track this - the penalties can be huge not to mention a potential fraud or negligence case.
I not sure who advised you of this, but this is incorrect. I could have a limited company called "Apguy Glass and Walls", just because one day I put in double glazing and the next day I build brick walls doesn't prevent me from treating all income and expediture as one pool of funds.
In my case I have a limited IT firm that writes software but also I repair vehicles (with 16 staff).
Maybe you haven't had too many issues but it is something that is always advised against.
We even had a VAT inspection (which is massively different from a VAT investigation) and this scenario threw up zero problems.
Then again this may be more of an issue with larger companies?
Well on my turnover of >£1mill per year, I guess I must be one of the smaller companies
The Inland Revenue rules essentially say that losses incurred in one trade cannot be offset against profits earned in another. The problem is trying to define what constitutes different trades. A fish and chip shop sells fish and chips. It does not have one trade selling fish and another selling chips. Both activities constitute one trade. However, if the fish and chip shop started repairing cars, the Inland Revenue would not allow losses incurred in car dealing to be offset against profits in selling fish and chips ( although, in reality, life is not that simple and there are some subtle differences in the way losses are treated in businesses run as limited companiues and those run as sole traderships).
The best thing is to talk to you accountant who should be able to explian all the permutations and variations.
The best thing is to talk to you accountant who should be able to explian all the permutations and variations.
apguy said:
Without wishing to labour the point:
To stop confusion I am referring to company a having 2 trades. Company A as a single legal entity will prepare a single taxreturn encompassing both trades.
Thats what I'm referring to, Company A Ltd is the legal entity and is one company, it just so happens to have another "branch" called B.
But legally you cannot set losses of one trade against another. If you have been doing this and the Inland Revenue track this - the penalties can be huge not to mention a potential fraud or negligence case.
I not sure who advised you of this, but this is incorrect. I could have a limited company called "Apguy Glass and Walls", just because one day I put in double glazing and the next day I build brick walls doesn't prevent me from treating all income and expediture as one pool of funds.
Yes beacuse this is one trade - 'building' if you like.
In my case I have a limited IT firm that writes software but also I repair vehicles (with 16 staff).
This is 2 different trades unless the software you write is say ECU related and the reapirs to cars are ECU related for example. Though without knowing exact details I am not in a position to comment properly.
Maybe you haven't had too many issues but it is something that is always advised against.
We even had a VAT inspection (which is massively different from a VAT investigation) and this scenario threw up zero problems.
VAT inspections are commonplace - often if you have being doing what you should and have a good coding/accounting system I wouldn't expect any problems. The two trades issue is a CT point and not VAT. Good though they found nothing - you are clearly on top of things.
Then again this may be more of an issue with larger companies?
Well on my turnover of >£1mill per year, I guess I must be one of the smaller companies
See below - I find that figure impressive with no of staff!
In response I would strongly suggest you read the legislation - ICTA 88 and the Inland Revenue CT Manual regards rules about what profits losses can be set against- (avaliable on the IR website before you jump in)! With Brought foward losses - can only be set against profits of same trade and current year I suppose with quasi-group-relief there could be some offset.
As Eric MC said there are grey areas where one trade and another are not clearly distinct however in some cases the trades are self-evidently unrelated.
As for turnover I was thinking of much larger sums- simply beacuse of the cases where loss streaming has been an issue I've seen, the companies are large.
As far as VAT goes this is a completely different kettle of fish - I refer to CT.
On a general note - I would strongly recommend to anyone thinkinf of setting up a company that they get a good accountant and one that is tax savvy - a lot think they know about tax but quite frankly give wrong advice. They don't need to be a tax advisor just someone who is up to date.
>> Edited by Stella star on Monday 16th August 20:58
>> Edited by Stella star on Wednesday 18th August 08:11
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