Is a Ltd company enough to protect yourself?

whitedragon101

I make websites and apps and am a sole trader.  Three of us (Me UK, guy 1 - Finland, guy 2 - Netherlands) are setting up a new website that will be a digital marketplace for people to sell digital assets (3d models for computer games).  We will make our money by taking a cut of each transaction.  The company will be a Ltd company likely in the Netherlands with 3 directors and each of us will have a 1/3 share.  Now the guy from Finland is pushing me to set myself up as a company so I own my 1/3 as the company. So a Ltd company 1/3 share owned by a Ltd company owned by me.  He says this will protect me "if things go sideways."  I don't really want to do this as either I have to get an accountant (I have no money and to start the business will be making no significant money) or do the work myself and risk being liable for making a mistake in managing a Ltd company.  I figure if a couple of years down the line things are successful or we are selling the company for a single payout I could become a Ltd company then and transfer my shares (and possibly directorship?) to the company.
Question :
- Are there any cases where holding my 1/3 share as a Ltd company (and potentially my company being a director with me appointed to that duty) would actually protect me from something that simply owning my 1/3 shares and being a director of a Ltd company as myself would not?

Many thanks

steampowered

This is not necessary if you are setting up a company.

The fundamental principle of companies is that companies have their own legal personality. Shareholders are not liable for the company's debts. So putting another company in the middle serves no function - other than to create an additional layer of complexity for tax purposes.

You do need to check what your friend is actually registering in the Netherlands. If he is setting up a company (i.e. a Dutch BV), there is zero need to have an extra company in the middle.

But if you have got your wires crossed and he is not actually not setting up a company, he is instead just registering a partnership (i.e. a Dutch CV) - partnerships are not companies and the partners can be liable for the partnership's debts; so in that situation you would want a company in the middle.

Marcon

whitedragon101 said:

I make websites and apps and am a sole trader.  Three of us (Me UK, guy 1 - Finland, guy 2 - Netherlands) are setting up a new website that will be a digital marketplace for people to sell digital assets (3d models for computer games).  We will make our money by taking a cut of each transaction.  The company will be a Ltd company likely in the Netherlands with 3 directors and each of us will have a 1/3 share.  Now the guy from Finland is pushing me to set myself up as a company so I own my 1/3 as the company. So a Ltd company 1/3 share owned by a Ltd company owned by me.  He says this will protect me "if things go sideways."  I don't really want to do this as either I have to get an accountant (I have no money and to start the business will be making no significant money) or do the work myself and risk being liable for making a mistake in managing a Ltd company.  I figure if a couple of years down the line things are successful or we are selling the company for a single payout I could become a Ltd company then and transfer my shares (and possibly directorship?) to the company.
Question :
- Are there any cases where holding my 1/3 share as a Ltd company (and potentially my company being a director with me appointed to that duty) would actually protect me from something that simply owning my 1/3 shares and being a director of a Ltd company as myself would not?

Many thanks

The guy from Finland could well be right. Get him to give you a more detailed explanation of how he thinks this will be the best way to go about things. Setting up a limited company costs peanuts and if you do some basic homework, isn't a big deal for a tiny company which will require no audit (when it does need one, you'll have plenty of money to fund it) and where the bookkeeping will be little more than you'd need to do in a personal capacity of your own tax return. See https://www.gov.uk/browse/business/limited-company

Savvy_Sue

Whatever you do, I'd say don't rely on our advice: get some of your own, which you pay for, from a solicitor with experience in this kind of area - companies with directors in different countries. 

It is possible that Finnish company structures are different to those in the Netherlands and this might be colouring your Finnish friend's stance. 

Annisele

You may well want an accountant anyway. How are you going to extract your money out of this Dutch limited company? I have zero knowledge of this, but I wouldn't be in the least surprised if there were different methods, with some more tax efficient than others.

If you're going to be a director of a Dutch company, you'll also want some knowledge of Dutch company law - "I didn't know I had to do that" isn't going to cut it as a defence.

You might also end up needing to know about tax in both the UK and the Netherlands. For example, under UK law I don't think you'd have a 'group' if one company owned a third of another (and therefore there'd be no requirement for group accounts no matter how big the companies were) - but I've no idea if that's true under Dutch law. Unless you do know, you need proper advice.

Will you be continuing with your sole trader business? If you are, then I'd imagine you're also going to want some sort of agreement with guy1 and guy2 to that effect - especially because it sounds like there might be a conflict of interest. Drafting that agreement might want a lawyer before you get started with anything else.