Share this content
Tags:

Start-ups and business structure

23rd Feb 2011
Share this content

Email out: 23 February 2011
 
‘He is actually just one of us, on the same level in the agency/collective, but since he had to start up his limited company he told us it would be much easier if he would make our agency/collective a 'brand' of his company (so yes, I would then work for 'his' company as a freelancer). This would like I mentioned save us some extra taxes that we would have to pay as an LLP and also as individual freelancers working for that LLP. The question is now, what would be for me the ideal entity.’
 
It is about time that you began to trust my judgement on business matters. If this company belongs to the gentleman you are in effect helping to build the brand of a company to which you are not a shareholder/director and your only reward is ‘wages.’ Nothing wrong with this arrangement as long as you understand that it gives you income but not a future. The gentleman building the brand is securing the future. Again nothing wrong with this arrangement as long as you understand.
 
Do not worry about the taxes. Let me take this worry from you. Worry more about your building of a business that will give you a longterm income and a future for yourself. If you make lots of money it does not matter if you pay some tax.
 
LLP is an efficient vehicle that is just as good as any other structure, However it gives you part ownership of the business enterprise and therefore the brand that you will not have as a subcontractor working for just wages.
‘The question is now, what would be for me the ideal entity. If I understand you well, you're saying that it is impossible for me to group all of my activities under one entity that at the same time could work for the agency/collective and do import business. If that is the unfortunate case, I presume that there are not a lot of options in regards to the entity I'll have to pick for my import business. In regards to my 'freelance work' -for the agency/collective as well as the commissioned work I'll do by myself- I understand that I'll have to choose between a limited company or a sole trader.’
 
A limited company can collect all the business activities under one roof and can give you a more efficient tax structure. However the problem with a limited company is that you only form one if you see this as a longterm venture and not just temporary. The wages drawn would serve as income of the limited company and would be paid into the business account number 1.
 
The import business income and expenditure would be paid into a separate business bank account and it would be up to the bank that they were happy to have two separate businesses under one roof. 
 
‘regards to my 'freelance work' -for the agency/collective as well as the commissioned work I'll do by myself- I understand that I'll have to choose between a limited company or a sole trader. The choice probably depends on how much money I'll make. Of course I'd like to pay as little taxes as possible  but also (aspecially in the futur when larger sums of money will be involved) limit the liability as much as possible. So if I am not mistaken, it might be a good option to start as a sole trader (little taxes for little profits) and then later on switch to limitied company (limited liability for larger profits) and all this aside from my import business for which I'll need anohter entity... Is that correct? Or are there other benefits of being a limited company from the start that are worth considering? ‘
This is well thought through by you. I would agree that since these are all temporary and you are looking totest the water it is better to begin as a sole trader but with two separate bank accounts. These should be distinct one for the wages drawn from the collective with its expenses and a second for the import/business with separate books and records for each.
 
The would be returned as separate businesses on your tax return form.
 
My regards
 
David Barry
davidbarryaccountants.co.uk

http://www.facebook.com
https://www.accountingweb.co.uk/blogs/davidbarry
http://twitter.com/#!/DavidBarasch
http://www.linkedin.com/profile/
020 8252 7018/07877671423

 

Tags:

You might also be interested in

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.