Merge my website business into partners Ltd?

userdefinable

Hi,

I'm not sure if this is the right website to post this on, but hopefully someone here can offer me some advice.

I operate as a sole trader, running a website which currently turns a very small profit (approximately £2000 profit a year from advertising and subscriptions, with a turnover around £2500). I never set this up as an Ltd as the costs seem prohibitive considering how much the business currently makes.

I would hope that the business will grow and be more profitable in the future, but there is no certainty in that regard. I don't think it's ever going to be generating a huge income. However, I also have other ideas for new websites and apps I may work on in the future.

My partner is an IT contractor, and operates through his own Ltd company. He wants me to be his secretary officially so he can pay me a wage. Although I do help out with the administration side of his business, I was apprehensive about getting a (full minimum) wage as it might be hard to prove that I do enough hours for that.

I was considering bringing my website into his business, but I'm not sure what the implications of that would be. I certainly could take a wage from the combination of hours I do on that, in addition to the admin I do for him.

Here are some questions:

- What would need to happen for my website to be considered part of his business?
- How easy would it be to un-link the two in the future if needed?
- Does it matter that his IT contracting and my website are not exactly the same type of thing (they are both IT related I guess?)
- Would putting my website in his business offer me more protection, e.g. in the unlikely event someone took me to court over something to do with my site? On the flip side, could this affect his contracting adversely, or affect his money brought into the business if something like that happened?
- If I did this I assume I would need to absorb the 20% VAT chargeable on subscription and advertising income? Currently I am not VAT registered.

Overall I'm trying to decide if this idea is workable and sensible, or if it's more likely to be messy and complicated.

00ec25

"partner": are you legally married? It matters.
Please appreciate from the outset that a company is a separate legal person so your question involves 3 separate people: the company, you, and your "partner".
The relationships between each are covered by tax laws that, to an extent, depend on what that relationship is in reality

- What would need to happen for my website to be considered part of his business?

you are a sole trader. If you want to gift your business to the company in exchange for nothing then you are free to do so.
On the other hand the company may want to buy your business

From what you have said so far you will not become a shareholder of the company, so the transfer does not involve having to account for the "goodwill value" of an existing business being absorbed into the company

- How easy would it be to un-link the two in the future if needed?

technically the company would be disposing of part of its business and would therefore expect to be paid for the part it sells off

- Does it matter that his IT contracting and my website are not exactly the same type of thing (they are both IT related I guess?)

it makes no difference if a Ltd company has more than one trading activity taking place with the company,

- Would putting my website in his business offer me more protection, e.g. in the unlikely event someone took me to court over something to do with my site? On the flip side, could this affect his contracting adversely, or affect his money brought into the business if something like that happened?

if you are merely an employee of his company then it would offer you perfect protection since it would have nothing whatsoever to do with you personally any longer.
Trading is in the name of the Ltd company, it is the Ltd which is the liable entity

- If I did this I assume I would need to absorb the 20% VAT chargeable on subscription and advertising income? Currently I am not VAT registered.

your prices would certainly have to include VAT. Whether you absorb that or increase your prices by 20% is your decision

userdefinable

Thank you for your comprehensive reply.

We are not currently married, but plan to get married within the next year. What difference would that make?

If I became a partner in the business how would that change things?

Would I be able to take minimum wage plus dividends in a similar way to him? Would it matter that my "arm" of the business is less profitable?

TheCyclingProgrammer

You could become a shareholder. You need to be careful of the settlements legislation, especially as you're unmarried - it doesn't automatically apply because you're unmarried but it can potentially apply and you won't have the benefit of the spouse exemption which has been tested in court (the Arctic systems case).

However, I'd argue that if you were to receive shares in the company in return for your existing business, it wouldn't even constitute a settlement in the first place - you aren't being gifted the shares (like the usual income splitting arrangements), you're receiving them in exchange for your business assets. Its a perfectly legitimate business transaction. I'd still go for ordinary shares with full voting and capital rights.

As a shareholder in the business you'd be eligible for dividends. It might be worth becoming a director of the business too.

You should definitely speak to an accountant and get some professional advice on the above and the ins and outs of actually doing this.