New comapny or sole trader?
Discussion
I have a chance to get a new client on board, but don't have th capacity (space, time etc).
I have someone who works for me on a self employed basis and was thinking about suggesting to her that she might want to take the business on in some sort of joint venture with me. I don't have the time to have day to day hands-on control but the contract would come my way based upon my experience to oversee business processes and advise the clients as and when (which the lady isn't qualified legally to do. She would provide day to day control, space, IT etc. The turnover of the new venture probably won't hit the VAT threshold.
Question is, if I effectively set up a business doing exactky what I am already doing but with this new person will the VAT and tax man insist they are run under the existing company, and if not, would a new limited company or a partnership work best? If we move work between businesses in busy and quiet times would that bring the tax and VAT man down on us?
I have someone who works for me on a self employed basis and was thinking about suggesting to her that she might want to take the business on in some sort of joint venture with me. I don't have the time to have day to day hands-on control but the contract would come my way based upon my experience to oversee business processes and advise the clients as and when (which the lady isn't qualified legally to do. She would provide day to day control, space, IT etc. The turnover of the new venture probably won't hit the VAT threshold.
Question is, if I effectively set up a business doing exactky what I am already doing but with this new person will the VAT and tax man insist they are run under the existing company, and if not, would a new limited company or a partnership work best? If we move work between businesses in busy and quiet times would that bring the tax and VAT man down on us?
The VAT people are aware that people sometimes split business in order to keep one or both activities under the compulsory VAT registration threshold (£58,000). They call it disaggregation and it is technically illegal - if proved.
Certainly, a sole trader trying to split his business into separate activities could come under scrutiny from the VAT people. However, if one of those activities is run on a different basis (i.e apartnership or a ltd co., then it is much less likely that disaggregation could be claimed.
However, on a more fundamental issue, do you want to hand substantial or complete comtrol of one of your businesses to a relative outsider?
Certainly, a sole trader trying to split his business into separate activities could come under scrutiny from the VAT people. However, if one of those activities is run on a different basis (i.e apartnership or a ltd co., then it is much less likely that disaggregation could be claimed.
However, on a more fundamental issue, do you want to hand substantial or complete comtrol of one of your businesses to a relative outsider?
The temptation is to 'franchise' where they provide the basic admin (which is tried and tested now) and day-to-day customer face, and I will QA, advise and pick-up the mess when it goes wrong. The other side of it is that thse other businesses may actually accrue a value more than my expertise, which at some point I could sell to another professional in my line of business. At the moment, when I decide to call it a day 'Me.inc; will just close because the demand is full time.
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