Formation of a business with 4 people what's best?

Laurencek

What way is best to register for tax etc, there are 3 of us and don't realy want to go down the limited company route (I have other business's which are ltd) as there's so much more paper work which I think will end up wasting our time when starting it off.


Thanks for your advise

L

paddyrg

3 or 4 of you?

To keep it all clear, limited company with different shareholdings according to who does what, and no dividends or salaries until the company is stable. That would be my preferred route depending on how much cash we're talking.

Laurencek

Sorry 3 fingers too big for phone ok just wondered if there was another way instead of another ltd business, All 3 of us are equal

paddyrg

You could form as a partnership, but it does leave all three of you rather exposed to the financial situations of the others, I wouldn't rush to suggest it. And it will attract the interest of HMRC, partnerships are notorious for being used as a tax avoidance structure.

bengalknights

I would recommend partnerships if you dont really want the hassle of a limited company plus it would also allow you stay below the vat threshold etc.

Laurencek

Great thanks for advise will also have a chat with my accountant next week,

Just trying to keep paper work at a low as I know ltd has alot of extra paper work and spend alot of time every week ( well the mrs does) trying to keep it in order and regarding Financial situations the business won't really have any debts as every thing is done on a cash account and paid up frOnt.

paddyrg

Not sure what weekly paperwork you envisage for ltd co, unless you mean annual accounts (annual) or payroll (weekly or monthly, but may also be needed for partnership anyway) or VAT (quarterly, applies as much to partnership as ltd company)? I run a couple single-handedly.

Do be aware, though, that one partner can spend money the other 2 have to make up in a partnership, you're jointly liable for the debts of the entity. Great if you really trust your friends and if business will not sour things, but proceed with caution. The kind of things you may fall out over are...

Wages - who gets what when? Is is fair to share all incoming cash 3 ways? When/how is money distributed? What about capital purchases? Where do they live? Are you keeping money in the company? What %age? What if 2 of you do that job, not all 3? What about expenses? 1 person can't drive so claims train allowance instead - first class or standard? If you're driving a beamer but making them travel in standard class, it can cause tension. Holidays, how do you handle those fairly in terms of payment? What happens if one partner goes to hospital for months? Do the other 2 carry them, or will you all insure your incomes? At what point and how can you kick someone out of the partnership? And hundreds of similar questions you need to answer before you do anything else - it will be too late once the partnership is formed, and will end messily.