One Ltd company, three businesses

Rose1988

Hi all,

I am starting a business and decided that financially, it would make sense for me to operate a Ltd Company rather than act as a sole trader. The issue is I wanted to start 3 types of businesses (not at the same time);

A product

An annual event

A consultancy

All businesses will be running in the same industry but they will all cater to different markets. I have approached my bank who have said they can open me a separate account for each businesses under 1 limited company and they will just add the trading name to each account so I know which account belongs to which activity.

What I wanted to know is if anyone had any experience doing this? Does it get messy? Is it best to have separate companies for each? I have requested a free 30 minute consultation with an accountant but it will take 48 hours for them to get back to me.

TIA

molerat

I should think a lot depends on the risks & liabilities of each arm, with only one ltd company the failure/debts of one arm could bring down the others.

Mistral001

Rose1988 wrote: »

I have requested a free 30 minute consultation with an accountant but it will take 48 hours for them to get back to me.

TIA

What! You cannot wait 48 hours? Why are you a Mediterranean country with a debt crisis?

Rose1988

Mistral001 wrote: »

What! You cannot wait 48 hours? Why are you a Mediterranean country with a debt crisis?

Thats not the issue at all.

I am speaking to an accountant for professional advice but was posting to seek feedback with people who have had an experience with such a scenario, that is all!

Sometimes it is good to hear from people who have been there or are doing it.

Savvy_Sue

While I'd definitely want to keep a note of which bit of the business each in and out payment related to, I'm not sure I'd want the hassle (and likely expense) of three separate bank accounts.

Will you have three separate names? Even if you would, you could still ask for payments to be made to the company name.

lisa110rry

I work for a company in the construction industry which offers cost recovery (from client) solutions on huge multi-million pound infrastructure projects. Obviously, that the system uses cost codes to separate off costs for the various activities (for example: right of way, topsoil stripping, trench excavation, etc).

Within the firm itself (as opposed to its consultancy activities) I have used a much simpler version of the above to cost code company costs to our four locations/activities, thus there is a general code for the company as a whole, one for our southern cost centre, one for our London cost centre (different) and one for recruitment into the firm cost centre. This is to do with paying bonuses after cost has been netted off income.

You could do something similar very simply with all your purchase/sales invoices on your accountancy software and just have one bank account in the company's name.

Rose1988

Thank you for your feedback, it allows me to think about other alternatives.

Lisa110rry, this is a very good idea as I am allowed to register more than one trading name on a bank account so I could have the option of things being paid using the Ltd company name or t/as name but keep everything under one account!

InsideInsurance

There is nothing to say a single company cannot do a hundred different things and in different industries. Only if you come under the watchful eye of the PRA or one or two other regulators may the mixture of business cause problems.

There are advantages, less administration cost/ hassle in running 1 company than 3, easier to cross share profits/ credit for newer businesses, advantage of a trading history when setting up the other arms etc.

There are also disadvantages, one arm could bring down the whole company, its more difficult to carve one thing out if you decided you wanted to sell part of the business, insurance may be more expensive if they take the companies whole turnover rather than just for the activity you want to cover, if you wanted to attract investment in one arm you'd have to give a share of the whole.

You need to be clear about what your long term realistic aspirations are and plans to get there to decide how best to structure your business and if to start off in one structure and change it as the business grows or start as you mean to go on etc.

paddyrg

The product may make or lose money
The consultancy should make money without much risk
The event could lose you a ton of cash very easily

Three very different risk profiles but if they're grouped together under one limited company they're all as safe as the riskiest. If your event rains off/has an accident and gets sued it could easily skewer the other two businesses. I'd suggest hiving it off into its own limited company just to ringfence liabilities should bad things happen. Did you know, for instance, that every feature film, every years festivals, etc are run as separate bodies corporate for exactly this reason?

Rose1988

InsideInsurance wrote: »

There is nothing to say a single company cannot do a hundred different things and in different industries. Only if you come under the watchful eye of the PRA or one or two other regulators may the mixture of business cause problems.

There are advantages, less administration cost/ hassle in running 1 company than 3, easier to cross share profits/ credit for newer businesses, advantage of a trading history when setting up the other arms etc.

There are also disadvantages, one arm could bring down the whole company, its more difficult to carve one thing out if you decided you wanted to sell part of the business, insurance may be more expensive if they take the companies whole turnover rather than just for the activity you want to cover, if you wanted to attract investment in one arm you'd have to give a share of the whole.

You need to be clear about what your long term realistic aspirations are and plans to get there to decide how best to structure your business and if to start off in one structure and change it as the business grows or start as you mean to go on etc.

Thank you. A lot to consider there

Pennywise

If three businesses under one company, you have free movement of cash between them, i.e. if one is profitable, and the other makes a loss. You also have easy transfer of losses to the profitable business for corporation tax purposes.

However, three separate companies means it's not as easy for one to prop up another. Monies drawn from one will basically be taxed as being paid to you personally, and then you pay the money into the other company with no tax relief. Same with transfers of tax losses, far more difficult to transfer a loss from co a to set against profits in co b, in fact you probably need a group structure which itself would be costly and hard to administer.

Advantages of separate companies are protection if one goes under, it won't take the others with it.

If you're not worried about protection, then simplest is one company, one bank account, but three trading divisions, but you need a more complex accounting/book-keeping software to analyse the different departments/cost centres to know how each division is progressing.

No easy answer, it's all a matter of relative risk, and how your businesses are likely to proceed, i.e. flows of cash between you and between each division.