Some advice please.

Lewie

Hi all.
Me and two family members have decided to merge our trades, all different.
We are all self employed and pay our taxes as sole trader self employed people.
What we want to do is use a trading name (not for tax purposes) but still stay self employed sole traders for now as it is early days and don't know if we are compatible work wise.
This is how we are working at the moment.
Example, two of us may be on one job helping each other while the third is on a job where he doesn't need help.
The next week we could all be on the same job or all on our 'own' jobs.
We get paid off all the jobs and all cheques are made out to the individual who priced the job.
After taking out expenses we split the profit three ways invoicing each other for labour or part labour part materials depending who has paid for what.
I had a quick chat with an accountant I know and he said that although the revenue would probably frown upon it, it isn't illegal as long as all taxes are being paid in full.
Just thought I would get a couple of other views.
Cheers.

steve1980

All the benefits of a partnership with none of the hassles.

Savvy_Sue

Botheration, wrote a long post explaining some the pitfalls I could see, and then lost it! Will try again ...

Lewie wrote: »

We get paid off all the jobs and all cheques are made out to the individual who priced the job.

I'd find this a bit confusing if I used several of you in response to a shared leaflet, I'd keep thinking of you as 'ABC Trades' or whatever, BUT that is a small point compared to ...

Lewie wrote: »

After taking out expenses we split the profit three ways invoicing each other for labour or part labour part materials depending who has paid for what.

If I'm misunderstanding, forgive me. I'm neither a tradesman nor an accountant, but it seems like an administrative nightmare to work out the profit (at least before year end). And if you're going to split it, you need a really really good partnership agreement, legally drawn up, covering all the 'what ifs' you can think of.

Because if one of A, B and C feel that they're doing more work than the others (and perhaps they are, for whatever reason) and start to feel aggrieved about it, you've got a recipe for trouble. Especially within a family, where there are also partners parents and in-laws and children who might express their aggrievedness even if the 'workers' had decided to button it for now.

Lewie

Thanks for the replies.
Savvy, I am the 'old git' of the trio, the others are my nephew and my future son in law (perhaps ).
I have been trading for over 25 years and was the least enthusiatic as I am well established where I live and was looking to slow down a bit.
There were too many vans driving around our area advertising all trades, as we can do most trades between us we thought we had better try it ourselves.
The other two have babbled on about this idea for ages, in the end I gave in and decided to give it a go.

Not sure of your concern about payment.
The customer deals with the individual who's trade matches the job we are doing, ie, they phone A for a burst pipe, B for a new drive etc, and the others are just like labourers on that job.
The customer then writes any cheques out to that one person.

As for working out the money, we have found it quite easy so far.
Ie, a job price totals £3,500.00.
Materials come to £500.00.
The person that received the cheque deducts the £500.00 leaving £3,000.00 profit pre tax.
The other two then raise a £1,000.00 invoice for labour to the person that got paid the cheque.
Each ends up with £1,000.00.

The 'who's working hardest' bit is easy, that's me!! Hahahahaha.
Seriously, we all know each other extremely well and we have already said that if anyone doesn't feel it is working out they can pull out no problem.
I am probably losing the most at the moment as I am working more and earning less but that is ok for a while, I expected it.
If it carried on like that after the first 6 months or so it may well be me that pulls the plug but there will be no hard feelings. (I hope!)

steve 1980, that's the idea for now, if it gets extremely busy then we will need to get a business account, accountant etc etc.

Creative P, thanks for the encouragement, just hope the tax man is happy!!

Savvy_Sue

Lewie wrote: »

The 'who's working hardest' bit is easy, that's me!! Hahahahaha.
Seriously, we all know each other extremely well and we have already said that if anyone doesn't feel it is working out they can pull out no problem.
I am probably losing the most at the moment as I am working more and earning less but that is ok for a while, I expected it.
If it carried on like that after the first 6 months or so it may well be me that pulls the plug but there will be no hard feelings. (I hope!)

That is when you need the really really good partnership agreement, and you need it (IMO) NOW, before any of you decide to pull out.

I'm glad that you're giving it a trial run and finding it working OK, I get your explanation and it sounds reasonable, although obviously you must keep on top of your invoicing etc. Also I wonder what would happen if any of you had trouble getting payment - sadly it's a story we see more and more often on this board. You might be able to take the hit, but would your nephew and SIL to be?

But if you wait until you do want to pull out and there's any dispute over anything - well, it's not just a business relationship you risk souring, it's also a family.

steve1980

Lewie wrote: »

steve 1980, that's the idea for now, if it gets extremely busy then we will need to get a business account, accountant etc etc.

Why would you not have a business account anyway? Can't think of anything worse than having to sort out what the business has made and what the normal bills are.

You can get 18 months free business banking with HSBC.

Lewie

Savvy. I have no worries about any disputes if one of us pulls out.
Having something legal wouldn't prevent people falling out if one of them felt aggrieved.
Personally, my word is my bond and if someone else (that I trust)gives me their word then that will do me.
The non payment thing actually works in favour of those that may find it difficult to 'take the hit'.
As it is split 3 ways the loss is only a third as well.
We do mainly local work and it is mostly word of mouth so there is little chance of non payment.
I have only had that situation once in my 25 years and that was 'sorted' after some choices were explained to the customer.

steve. I have never had a business account. I went to my bank to open one once and you would not believe the questions I was asked.
They even wanted to know where I bought my materials??
That was enough for me, I left and stuck to my personal accounts.
I find it quite easy to keep everything seperate.
If you check every transaction on bank statements and keep all card receipts it's not a problem.
Business accounts are just another excuse for banks to make yet more money so we will avoid them if poss.

steve1980

I opened my HSBC business account up in 20 minutes over the phone, standard questions.