Sole trader / Ltd personal mortgage

scriblesvurt

Hello,

I am looking at the possibilities of starting a private education company this summer to start in the new school term. I haven't decided which form of trading I will go for be it Sole Trader or Ltd. My family plans to move house in approx Sept 2011. I am currently employed.
If I do start up, what problems will I have getting a mortgage? I will have been trading for one year and my partner is full time employed. If I go Ltd will i be classed as an employee for mortgage purposes?
Any help much appreciated.

Scribbs

happybroker

unless the shares in the ltd co are spread between quite a few people then you will be classed as self employed.

as things stand today, 1 years trading will severely limit your options when looking for a new mortgage.

scriblesvurt

Right, so it may be a good idea to put off starting the buisness until we move so i can get a new mortgage as an employee of my current job?

happybroker

it depends to a degree on your wife's income (sorry I should have posted that in my initial reply), if she earns enough to cover the mortgage on her own then how long you have been self employed on't matter a fig frankly.

moving house and changing from being employed to self employed are pretty big things and this makes the whole situation more emotive than just putting one off for the other.

If moving house is necessary at that time and you are unhappy enough at present to "need" to go self employed this year then that's your lot and would a reduced number of lenders willing to help be sufficient an issue to stop you doing one or the other? There's only one person can answer that, and it isn't any of us.

Consider also that your first year's accounts are probably not going to look too wonderfull. It's an accountant's job to mitigate your tax liability by making your income look as small as possible, this isn't, however, going to help with getting mortgage finance.

It's a difficult one, sorry I can't be more precise.

scriblesvurt

How many people would the shares have to be with? Hmrc classes ltd company directors as Employed. I would have a years worth of payslips from my payp so why would I not be able to apply to an all of Market broker as employed and provide payslips for evidence? Sorry if this is a stupid question but it realy confuses me! Thanks.

scriblesvurt

Can you not pass the majority of shares to a relative?

happybroker

presumably you would be setting up as a ltd co to take advantage of the tax position with dividends. The problem with this is that dividends are paid per share and as such the income would go to the owner of that share.

There isn't really a way around this unfortunately. The broker and lender would ask if you own shares in the company that employs you or at least if you own over a certain percentage. Furthermore, many lenders have a bit of an issue with people employed by family a business which is understandable to degree.