ltd company formation.. joint
Discussion
A friend and I are starting a new business, we are both quite actively trading anyway as sole traders ranging from services (web design) to mail order goods, import etc. The business is to expand on what we are already doing, and hopefully by working together move it up to a larger scale.
We want to create a Ltd company for the new business, and both be directors. It will have a company bank account, and have the usual stuff like merchant account etc. I have been trading as a sole trader with all this before, but with this new project and because of the scale, it needs to be a proper joint company for both tax and the fact there’s two of us. No finance is required, so no reason to do anything to improve credit etc.
Our long term plan is to enter into property, and would like to extend the company into this, using company profits.
I am not that up on company laws - because I trade anyway, and I am not VAT registered, I need to establish how being a director of a company will effect my current VAT status, will I have to become VAT registered my self if the new company becomes VAT registered (if it turns over 56k+)?
Also... I think (from the little I understand of it) that its best to create a parent company for the two of us, then make the actual company a trading name. Like "Company Group Ltd trading as Company Name.com" as this will make tax easier, and mean that company money can be churned into future projects without transferring it between businesses.
Later this year we hope to move into other things too, so this will come under the same group - but different trading name. Is it better to have a company entity for every trading name? Like "The ABC Group" with the child companies "BCD Ltd" "CDE Ltd" and so on?
Finally - I know the word "group" is a resurved word, but would using it in the term "COMPANY NAME GROUP LTD" be ok if there were more than 1 trading names?
If anyone could give me some advice on this little lot before I go down the road of forms and to a solicitor, I would be really grateful. Thanks so much in advance.
Sorry for asking so much in one post.
(Edited to add a couple of words)
>>> Edited by s a m on Thursday 30th December 01:37
We want to create a Ltd company for the new business, and both be directors. It will have a company bank account, and have the usual stuff like merchant account etc. I have been trading as a sole trader with all this before, but with this new project and because of the scale, it needs to be a proper joint company for both tax and the fact there’s two of us. No finance is required, so no reason to do anything to improve credit etc.
Our long term plan is to enter into property, and would like to extend the company into this, using company profits.
I am not that up on company laws - because I trade anyway, and I am not VAT registered, I need to establish how being a director of a company will effect my current VAT status, will I have to become VAT registered my self if the new company becomes VAT registered (if it turns over 56k+)?
Also... I think (from the little I understand of it) that its best to create a parent company for the two of us, then make the actual company a trading name. Like "Company Group Ltd trading as Company Name.com" as this will make tax easier, and mean that company money can be churned into future projects without transferring it between businesses.
Later this year we hope to move into other things too, so this will come under the same group - but different trading name. Is it better to have a company entity for every trading name? Like "The ABC Group" with the child companies "BCD Ltd" "CDE Ltd" and so on?
Finally - I know the word "group" is a resurved word, but would using it in the term "COMPANY NAME GROUP LTD" be ok if there were more than 1 trading names?
If anyone could give me some advice on this little lot before I go down the road of forms and to a solicitor, I would be really grateful. Thanks so much in advance.
Sorry for asking so much in one post.
(Edited to add a couple of words)
>>> Edited by s a m on Thursday 30th December 01:37
s a m said:
I am not that up on company laws - because I trade anyway, and I am not VAT registered, I need to establish how being a director of a company will effect my current VAT status, will I have to become VAT registered my self if the new company becomes VAT registered (if it turns over 56k+)?
Morning,
I'm sure someone will clarify, but I'm sure you wont have to as a sole trader just because you are on a ltd Company. Afterall, it's the company thats VAT registered and not you anyway - if you leave the company it will still be VAT registered. So, I'd be pretty confident in saying, No. However, that seems like a logical answer and we are dealing with the government here and I have been known to be wrong before.
Also, I think it's less than 56k, and you can register before that if you like. I think if you are in it for the long haul you may aswell get VAT registered from day 1. Apart from a small amount of extra admin, it's all in your best intrest too. When forming companies, this is the time you most need to claim back your VAT as cashflow is usually at a minnimum.
In regards to the "group" question, it's something I've been pondering myself for a while, and I was about to speak to a few people about this in the new year as I need to set up a "group".
I shall watch this thread with :rockyhorror/on: anticipation :rockyhorror/off:
Cheers,
JC
If all (or most) of your income is generated through the new company then there is no need (or indeed concept of) you personally being VAT registered - it would be the business that would be VAT registered.
However, if you continue to trade as a Sole Trader in addition to the new company, then once the turnover of your Sole Trader business reaches the threshold you'll need to register that for VAT too.
However, if you continue to trade as a Sole Trader in addition to the new company, then once the turnover of your Sole Trader business reaches the threshold you'll need to register that for VAT too.
Legally, a limited company is totally separate from you as an individual. Therefore, under the VAT regulations, the VAT registration limit of the company is also totally separate from you as an individual. If your sole trading income is below the VAT registration threshold and the limited company's turnover is above the threshold, only the limited company has to register.
Customs and Excise are aware that some individuals might try to split turnover in an operation in an attempt to keep one operation out of VAT. This is called "disaggregation" and they can force a business to combine their incomes and declare VAT on all of it. However, this is something you usually see when an operation is being run by sole traders or in partnerships (pubs are often guilty of this - splitting bar sales from food sales and trying to claim that they are two separate activities).
The VAT turnover threshold is actually £58,000. However, if a business wants to, they can register for VAT even if the turnover is below this level. This is called "Voluntary Registration".
Be aware that the VAT regulations surrounding dealings in land and property can be extremely complicated. Some activities are "Exempt" (Rent, - usually, but not always) some are "Zero Rated" (new build houses and related services) and some are "Standard Rated" ( commercial property development and related services). These permutations can cause all sorts of problems as it is not always clear exactly what activity falls into what category and there are also implications in the ability of the company claiming back Input VAT on its costs.
Do not use the term "Parent Company" unless the company actually "owns" one or more other companies. A company is a Parent Company when it owns all or most of the shares in other limited companies. In that way, it can control the activity of the other company and is entitled to shares of the profits (dividends) from the other companies (which are referred to as "Subsidiaries"). This is a fully fledged "Group".
A group of companies has to have individual accounts prepared for each company and, in most circumstances, also has to prepare a set of consolidated accounts showing the overall activity of the entire group. All this can work out fairly complicated and expensive to administer.
A simple company is still quite a bit more complicated to look after than a similar sized sole trader. However, there are some advantages in running your business through a limited company. One, as mentioned above, is that it is a separate entity from you for VAT purposes. Two, there is an element of legal protection from your creditors. Three, there are some potential tax savings, although Gordon Brown is doing his best to erode these.
It is perfectly OK to have your company trade under a different trade name e.g. XYZ Ltd Trading as ABC Plumbers is perfectly OK. However it might be just as easy to call the company ABC Ltd or ABC Plumbers Ltd rather than having to explain to people the difference between the company's real name and its trading name. In the end, how you want to play it is up to you.
The limits of what the company can do are not set by its name but by the details contained within the Memorandum and Articles of Association.
Hope this helps.
>> Edited by Eric Mc on Thursday 30th December 10:25
Customs and Excise are aware that some individuals might try to split turnover in an operation in an attempt to keep one operation out of VAT. This is called "disaggregation" and they can force a business to combine their incomes and declare VAT on all of it. However, this is something you usually see when an operation is being run by sole traders or in partnerships (pubs are often guilty of this - splitting bar sales from food sales and trying to claim that they are two separate activities).
The VAT turnover threshold is actually £58,000. However, if a business wants to, they can register for VAT even if the turnover is below this level. This is called "Voluntary Registration".
Be aware that the VAT regulations surrounding dealings in land and property can be extremely complicated. Some activities are "Exempt" (Rent, - usually, but not always) some are "Zero Rated" (new build houses and related services) and some are "Standard Rated" ( commercial property development and related services). These permutations can cause all sorts of problems as it is not always clear exactly what activity falls into what category and there are also implications in the ability of the company claiming back Input VAT on its costs.
Do not use the term "Parent Company" unless the company actually "owns" one or more other companies. A company is a Parent Company when it owns all or most of the shares in other limited companies. In that way, it can control the activity of the other company and is entitled to shares of the profits (dividends) from the other companies (which are referred to as "Subsidiaries"). This is a fully fledged "Group".
A group of companies has to have individual accounts prepared for each company and, in most circumstances, also has to prepare a set of consolidated accounts showing the overall activity of the entire group. All this can work out fairly complicated and expensive to administer.
A simple company is still quite a bit more complicated to look after than a similar sized sole trader. However, there are some advantages in running your business through a limited company. One, as mentioned above, is that it is a separate entity from you for VAT purposes. Two, there is an element of legal protection from your creditors. Three, there are some potential tax savings, although Gordon Brown is doing his best to erode these.
It is perfectly OK to have your company trade under a different trade name e.g. XYZ Ltd Trading as ABC Plumbers is perfectly OK. However it might be just as easy to call the company ABC Ltd or ABC Plumbers Ltd rather than having to explain to people the difference between the company's real name and its trading name. In the end, how you want to play it is up to you.
The limits of what the company can do are not set by its name but by the details contained within the Memorandum and Articles of Association.
Hope this helps.
>> Edited by Eric Mc on Thursday 30th December 10:25
Eric Mc said:
The limits of what the company can do are not set by its name but by the details contained within the Memorandum and Articles of Association.
Hope this helps.
Unless the objects clause is to carry out a general commercial enterprise, in which case there are no real limits on what the company can do.
Agreed.
But you do need to ensure that the activities do not exceed whatever the Memo and Arts allow. Otherwise the directors could be accused of acting "Ultra Vires" (i.e. beyond their authority).
Most modern Memo and Arts are so general that "Ultra Vires" is far less likely to occur - but the regulation still exists.
But you do need to ensure that the activities do not exceed whatever the Memo and Arts allow. Otherwise the directors could be accused of acting "Ultra Vires" (i.e. beyond their authority).
Most modern Memo and Arts are so general that "Ultra Vires" is far less likely to occur - but the regulation still exists.
Eric Mc said:
Agreed.
But you do need to ensure that the activities do not exceed whatever the Memo and Arts allow. Otherwise the directors could be accused of acting "Ultra Vires" (i.e. beyond their authority).
Most modern Memo and Arts are so general that "Ultra Vires" is far less likely to occur - but the regulation still exists.
Indeed, but that would not effect the validity of any such actions, only make the Directors liable for any losses caused, to the company.
It could be an issue if the company went under. If directors have acted beyond their powers, then outside creditors who are owed money couild actually seek redress from the directors themselves - i.e. the directors would lose the protection of "limited liability".
This is one of the reasons why Memo and Arts are now so broadly drawn. Short of committing a criminal act, most directors are pretty free to do what they like with their own company.
This is one of the reasons why Memo and Arts are now so broadly drawn. Short of committing a criminal act, most directors are pretty free to do what they like with their own company.
s a m said:
We want to create a Ltd company for the new business, and both be directors. It will have a company bank account, and have the usual stuff like merchant account etc. I have been trading as a sole trader with all this before, but with this new project and because of the scale, it needs to be a proper joint company for both tax and the fact there’s two of us. No finance is required, so no reason to do anything to improve credit etc.
You need to chat to an accountant. For about 150 quid, they will set up an off the shelf company for you.
If your turnover goes over about 55K, get VAT registered.
Advanced stuff like parent companies don't sound like the right thing to do to me, but again accountant will advise professionally on this.
Don't think you need a solicitor - just any high street accountant.
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