What do you wish you'd known before setting up your Limited Company ❓

DullGreyGuy

Grumpy_chap said:

DullGreyGuy said:

1 fee earner consultancy does its annual AGM with its 4 shareholders (fee earner, wife and two teenage kids) in Dubai each year (aka a family holiday). 

This is an interesting one if all the shares are of the same class then all shareholders receive the same dividend payout.  It either precludes taking the majority of salary as dividend or makes for rather well off children who can do as they wish with their own money..

I would be highly surprised if the dividends didn't make it back to the parents either directly or via rent charges for living at home etc. I understand his general approach was to work a contract or two, dissolve the company claiming Entrepreneurs Relief and 2 months later form a phoenix company and rinse and repeat. 

That said, not convinced everything he claimed was true... he said he part owned a vineyard and his grapes were used in an award winning wine but after pushing he said he was growing X grapes and whilst the wine is a blend of grapes it didn't include X. There were a few other errors in things he said like his pilots license, the classic car he owned etc. 

Grumpy_chap

DullGreyGuy said:

That said, not convinced everything he claimed was true...
There were a few other errors in things he said like his pilots license, the classic car he owned etc. 

Hmmm, I never understand this airs-and-graces type claim to success or affluence. 

We've all met people that do that but, in the main, they cannot recall correctly what they are meant to own or not own.  I once knew someone who claimed to own a Ford Dealership but then purchased his daughter a Kia Picanto when she learned to drive which, frankly, did not add up.  Then add that he drove a (rather aged 14 yo) Maserati and his wife an old and basic 3-series.  Plus the fact he never wore a smart pair of shoes - he wore brogues, but always worn and never polished.  You can tell a lot by looking at a man's shoes.

Fortune_Smiles

DullGreyGuy said:

Get a good accountant for the field of business you will be operating in. Make sure your risk appetite and their recommendations are aligned. 

Some people are happy taking a very aggressive stance, I know some where their 1 fee earner consultancy does its annual AGM with its 4 shareholders (fee earner, wife and two teenage kids) in Dubai each year (aka a family holiday). Others take a much more cautious approach... our accountant for example recommends that the share structure should reflect the effort of the parties involved so a 50/50 would only work if husband and wife were equally instrumental in running/success of the business. 

Thanks @DullGreyGuy.  We're still giving the share structure some thought - although I already feel as though I've earned my 50% doing all the research 😂 I also know someone who claims holidays and other personal luxuries as business expenses.  We always try to do what's right so I think that's the approach we'll be taking on the tax front.

Thanks again

Fortune x

Vectis

Fortune_Smiles said:

...We both have income from pensions already and are only looking to replace a small gap in income once Mr F stops working for his employer...

How small? Because it can simply become not worth the time and effort to run and/or pay for the admin etc of a Limited Company if your turnover is relatively small.

Why do your clients want you to set up as a Limited Company rather than as a sole-trader? Why do they get a say? I've operated as both and never had a client question why it was one or the other. Originally we set up as a Limited Company because we were growing but changed a decade or two later to a sole trader as we down-sized.

DullGreyGuy

Vectis said:
Why do your clients want you to set up as a Limited Company rather than as a sole-trader? Why do they get a say? I've operated as both and never had a client question why it was one or the other. Originally we set up as a Limited Company because we were growing but changed a decade or two later to a sole trader as we down-sized.

A client always has a say... if they wont engage with sole traders because they are concerned that workers rights etc could at a later date be claimed they could just have a blanket rule that suppliers must be incorporated or transact via an umbrella.

Simply because your contract identifies you as a sole trader doesn't mean that's how HMRC or the courts would judge you.  Just look at Uber drivers that were signing contracts as sole traders but the Supreme Court ruled they were Workers and so due minimum wage etc.

You can obviously refuse to incorporate but then you just dont work for that client. In certain lines of business its going to be the majority not minority

Fortune_Smiles

Vectis said:

Fortune_Smiles said:

...We both have income from pensions already and are only looking to replace a small gap in income once Mr F stops working for his employer...

How small? Because it can simply become not worth the time and effort to run and/or pay for the admin etc of a Limited Company if your turnover is relatively small.

Why do your clients want you to set up as a Limited Company rather than as a sole-trader? Why do they get a say? I've operated as both and never had a client question why it was one or the other. Originally we set up as a Limited Company because we were growing but changed a decade or two later to a sole trader as we down-sized.

DullGreyGuy said:

Vectis said:
Why do your clients want you to set up as a Limited Company rather than as a sole-trader? Why do they get a say? I've operated as both and never had a client question why it was one or the other. Originally we set up as a Limited Company because we were growing but changed a decade or two later to a sole trader as we down-sized.

A client always has a say... if they wont engage with sole traders because they are concerned that workers rights etc could at a later date be claimed they could just have a blanket rule that suppliers must be incorporated or transact via an umbrella.

Simply because your contract identifies you as a sole trader doesn't mean that's how HMRC or the courts would judge you.  Just look at Uber drivers that were signing contracts as sole traders but the Supreme Court ruled they were Workers and so due minimum wage etc.

You can obviously refuse to incorporate but then you just dont work for that client. In certain lines of business its going to be the majority not minority

I know what you mean @Vectis - it does seem a lot of hassle for what we need to bring in and we would rather operate as a sole trader.  However, limited seems to be a general requirement for Mr F's industry now so we have to go that way if we want to make any money.  I suspect @DullGreyGuy is right and it's to avoid later claims for employee rights. In addition, mistakes made in Mr F's industry could result in huge liability so it's a safer way to go for us.

Thanks for the input guys - all discussion is helpful to our thinking.

Fortune x

Annisele

Do people work under umbrellas in Mr F's industry? If so, it's likely worth costing up paying somebody to act as an umbrella as an alternative to setting up as your own limited.

Grumpy_chap

Annisele said:

Do people work under umbrellas in Mr F's industry? If so, it's likely worth costing up paying somebody to act as an umbrella as an alternative to setting up as your own limited.

Operating through an UC will mean less take home than own Ltd Co 

It also means not having your own company.

Fortune_Smiles

Annisele said:

Do people work under umbrellas in Mr F's industry? If so, it's likely worth costing up paying somebody to act as an umbrella as an alternative to setting up as your own limited.

Grumpy_chap said:

Annisele said:

Do people work under umbrellas in Mr F's industry? If so, it's likely worth costing up paying somebody to act as an umbrella as an alternative to setting up as your own limited.

Operating through an UC will mean less take home than own Ltd Co 

It also means not having your own company.

Thanks for dropping by @Annisele.  Umbrellas aren't an option for us as prospective clients are all asking for own Ltd Co.  But your comment is still useful as it's making me review and revise all the options available which is a good thing.  Keep them coming folks.

You are right @Grumpy_chap it would be a more costly option for us.

Fortune x

uknick

At the very basic level get your financial accounting period, that is the year end, right for you from the start.  We have had clients who come to us after registering with Companies House and take the default year end given to them.

For instance, one client registered in August and was given a year end of 31 August.  They then realised it was better for them to have a 31 March year end to tally with the personal tax year.  You can amend it later at Companies House, but why not think about it before you register.