Man and Van - Limited Company?

Bogof_Babe

I am new to this board, and apologise if this question has been covered in the past, but a search on "limited company" found no results.

My husband and a colleague are thinking of taking early retirement and going self employed as painters/decorators/odd-job-men. Now that they are giving it serious consideration, we are wondering whether they need to form a limited company to avoid problems should anything go wrong, either financially or in the event of them being sued for something. Obviously we cannot run the risk of our homes being in jeopardy.

I was also thinking of doing their accounts, but it would only be a basic self-designed spreadsheet system. I doubt they would have enough turnover to attract VAT, but we would need to know about general tax and insurance matters. We don't want to incur huge start-up costs for this "business", but is this inevitable?

Can anyone suggest a suitable website that would answer all these sorts of questions? Many thanks.

Murtle

Hey sounds good!!

Companieshouse.gov.uk will be able to help

There is an amount that you need to earn before you HAVE to register for VAT this is +/- £58,000 (needs to be checked - it's a strange number!)

My brain has just gone numb to the info I was going to add :-( having just set one up myself, but it doesn't have to be costly, less then £100 to register as a limited company.

Justin_Credit

Hi Bogof Babe

To quote the first part of your post

"My husband and a colleague are thinking of taking early retirement and going self employed as painters/decorators/odd-job-men. Now that they are giving it serious consideration, we are wondering whether they need to form a limited company to avoid problems should anything go wrong, either financially or in the event of them being sued for something. Obviously we cannot run the risk of our homes being in jeopardy."

Well, I suppose the answer to that is NO they don't need to set up a limited company to carry on their trade. So long as they have adequate Public Liability insurance and go about their work in a professional manner there shouldn't be too many problems and your home will be safe. On the financial side, so long as they keep good records and it sounds like you will be doing that, they will be able to keep a close eye on things and not run into debt.

I am self-employed and do my own book-keeping using an Exel workbook that I have devised myself and it works well for me. I think that book-keeping for a partnership would be pretty much the same.

I think that there would be more to consider though if they were to set up a limited company. I have never done it myself but I believe that as company directors they would take an income and have to pay PAYE which means more admin. Limited companies accounts, I believe, have to be audited and a copy sent to Companies House every year. There are probably other considerations too which are all probably best discussed with an accountant.

Have a look at the Inland Revenue website, it has loads of useful information on there covering self-employment, partnerships and limited companies, sorry I don't have the address but just do a search for Inland Revenue on a search engine.

I hope this has been of some help.

JC

Bogof_Babe

A huge thanks to both of you for your really helpful replies. I will be digesting these over the next few days, as they haven't quite made their minds up yet! I don't think they would make a lot at it, both being more perfectionists than speedy workers - and they would obviously have to get a feel for the sort of rates they could charge given the area and their lack of business experience. It is one of those things that starts as a "what if" idea, and then the problems kick in as they get keener!

They are in a position to take small pensions, due to their previous employer having been taken over, so this might complicate the financial situation too. When I say small I do mean about £65 per week - hence the need to supplement it!

Anyway, much food for thought and thanks again. No doubt I will be back on this board asking for more help and opinions soon!

JayneH_3

I think you would find Business Link very helpful to you. They run a services to help start up companies, and can answer all your queries. I notice you are in Hereford, so I think you come under the same Business Development Centre as Worcester. The telephone number is 01905 612412 - I can vouch that the advisors there are all very friendly!

Poppy9

Your husband needs to seriously consider if he can work with a partner. It can be fraught with difficulty. Is one an early riser and the other not. Are they both reliable. How much holiday to they like to take and when. Is one bossy? Do you get on with your intended partner oh. Friends working together can work - but often it doesn't. They should start small and not register as a Ltd co. to see how they get on for a few months.

Savvy_Sue

Poppy's made some very good points, but another to consider is that the business will grow faster if there are two of them - or at least it should do! I know one partnership which dissolved not long ago because together they had reached the stage where they needed to register for VAT, but separately they would be OK. As their 'trades' were separate it was easy enough to do this, and they continue to work together and recommend each other where appropriate.

But it led me to want to add to Poppy's post that if they have different specialities then that could also lead to friction if, say, there was more call for one of them than for the other so one felt over or under worked.

Whatever they end up doing, thinking it through thoroughly first is never a waste of time!

WHA

Don't fall into the common trap of "under-charging" for your services.

Many people starting in trades/services business simply don't charge enough - this seems to be because they either havn't done their research as to competitors' charges or they charge too cheap because they perceive themselves to be less valuable, perhaps due to lack of experience. Also, many people don't realise how much they will have to pay out in expenses and overheads, including professional fees, bank charges, insurance, advertising, office supplies, etc, not to mention making private provisions for pensions, sickness insurance, health insurance, life insurance etc., often included in employment and generally poorer state provision for the self employed. They end up working all hours and earning less per hour than stacking shelves at the local supermarket - the term "busy fool" comes to mind.

Some simple tips..

Firstly, have a flexible pricing structure. Don't publicise fixed hourly or "by task" rates. You need the option to charge more to compensate for extra travelling costs, more time needed, parking tickets in some areas, local tip trade charges, any consumables you may use, etc. You also need the flexibility to charge more for popular days (i.e. weekends), and charge less for quiet days (i.e. mid week), and charge more for early mornings, evenings etc. Charge more if you are called upon at short notice, charge less if you can schedule the work for quiet days/weeks ahead. Charge more for affluent people/areas, charge less for poor areas/pensioners etc. Properly evaluate your potential customer and get all the relevant facts before you quote! You may feel these ideas to be "morally wrong" at first thought, but remember you are in business now and the most successful businesses do offer variable pricing based on supply and demand.

Secondly, be very specific as to what you will do and what your charge covers. A written detailed quotation is absolutely essential. It is very easy to get drawn into doing more than you thought and quoted for. If possible, give options on your quote - i.e. mention any potential additional work that may be required and the costs for doing so. If you are up-front about any potential extras, you are more likely to be able to charge for them.

Thirdly, don't be afraid to turn away any work you don't want. Try to get as much detail as possible when the customer first phones you. Never give any idea of pricing until you know exactly what needs doing. If the job, or the customer, sounds like trouble, simply say "no" or quote a price high enough to justify the hassle. Insist on upfront payment if you think you may not get paid afterwards. You need to weed out the problem customers before you waste your time.

ReductionQueen

After giving a partnership a try, say 6 months, to see how they work together. Then, if you decide to carry on, I would register a company to protect your personal property.

There are a few more things to do yearly, ie accounts and registering them, but personally I think the benefits outwiegh the pitfals. They include the appearance of a bigger than man-and-van company, and not forgetting the big plus of being able to truthfully say that you are an employee (albeit of your own company) rather than self employed on credit applications.

Self employed is not a plus as far as the credit card companies are concerned, but avoid the term company director as they are fully aware how easy it is to become one. For this purpose, I always say Manager.

Ltd companies are easily bought online or through advertising mags such as exchange and mart, for as little as £50. For an extra fee, you can even have a nominee company secretary, which is a person unrelated to the business named at companies house. They don't have any say in the company's running, and are not shareholders.