sole traders > ltd company

skater_kat

my partner does freelance consultancy/training as a sole trader and i have not started trading yet - but i would like to start a craft business.

my partner is interested in turning into a ltd company instead of a sole trader.

my question is, can the limited company have two different 'trading activities' underneath it, to make it more efficient for us financially - i.e. we both do our business activities under the ltd company with one set of accounts? or does each business activity have to be entirely separate?

totally new to this so any advice is appreciated! thanks.

Slinky

Yes you can both trader under the same ltd company but be aware that if you reach the VAT threshhold with your combined business turnover, you will both have to charge VAT on your goods/services which could make your craft business expensive compared with your competitors.

Pennywise

No problem at all in having more than one business operated by a single limited company.

However, you should set up your book-keeping so that you can produce Profit & Loss accounts for each separate business. Most people do this by use of cost centres, i.e. one cost centre for yours and another for OH's, but you can also do it by having separate nominal account headings, i.e. code 5000 sales (your business) and Code 5001 sales (OH business).

This is important because HMRC require you to be able to channel profits/losses "per business" particularly if one business produces a loss, as there are special rules for dealing with losses - you can't just aggregate all businesses and declare a "net" profit between them if one has a big profit and the other a loss.

Whilst many accounting software products offer cost centres, or departments, etc to make this relatively easy, others don't, particularly the freebie/cheap systems, so you need to check whether your book-keeping software would be capable.