Should I trade as a Limited Company, umbrella or composite

[malvolio]

What you contemplate is not a composite, which, put simply, is a holding company issuing shares of different classes to individual shareholders such that they can be paid dividends in proportion to the fees they bring in, purely in order to avoid paying NICs on that portion of the income.

However, if you don't know that, what else don't you know? Have you got an accountant? I think you need one, quickly...

[Sockpuppet]

Originally Posted by academic

Hi,

I am moving into contracting world. Have two options , start my own Limited or join with a friend of mine as director( he doesn't have one , we want to register it together). I understood from this post that HMRC targets composite companies than own Limited companies.

When is a company called as composite ?? When my self and my friend start a company and we both are directors , is that called a composite.?? Or a group of people...

My wife will be secretary & his wife as another employee..

I want to take a decision based on your opinion.


Thansk in advance for your answers.

Thanks,
Academic

Never take a decison based on our opinion. Get professional advice!

That would not be a composite company, well certainly not one big enough to attract HMRC attention. They are after the people like 1stcontact who just register stupid comapny names and fill them with punters.

Also never mix business and pleasure. I'd register them as 2 seperate Ltd companies unless you are working together. If you are working on seperate things then its probably not the best idea. I keep all of my money well away from friends, it has a nast y habit of making people act crazy.

[Lucifer Box]

Originally Posted by academic

Hi,

I am moving into contracting world. Have two options , start my own Limited or join with a friend of mine as director( he doesn't have one , we want to register it together). I understood from this post that HMRC targets composite companies than own Limited companies.

When is a company called as composite ?? When my self and my friend start a company and we both are directors , is that called a composite.?? Or a group of people...

My wife will be secretary & his wife as another employee..

I want to take a decision based on your opinion.


Thansk in advance for your answers.

Thanks,
Academic

If you are a typical freelancer, that is an insane suggestion. What happens when you and your friend fall out? Or if one of you is earning and the other is on the bench?

Unless you are genuinely founding a joint venture consultancy, each get your own Ltd and a decent accountant. A cursory search will give you the usual recommendations of this board as to an accountant who will set it all up for you.

[freshblue]

Originally Posted by mankiemogwai

I posted this on this thread once before but it seems to have got lost...

I felt the best option was to avoid Umbrellas/composites and alike (based on the above nightmare stories) so I looked in to having my own Limited company run by someone else and came across this bunch - www.cakeincome.co.uk
.... it is working well for me!

"Are you Gabem in disguise, Are you Gabem in disguise"

[gadgetman]

I am about to move perm to contract and am trying to decide which way to go in terms of umbrella, LTD co etc. I have contracted in the past (before IR35) and think I have a good handle on the issues.

There seems to be a consensus in this forum the Ltd Co is a good thing. However, assuming the worst case that my contract is within IR35 I can't see much to recommend Ltd Co over Umbrella. Are there any significant factors I am missing?

[Nixon Williams]

Originally Posted by mbriody

I am about to move perm to contract and am trying to decide which way to go in terms of umbrella, LTD co etc. I have contracted in the past (before IR35) and think I have a good handle on the issues.

There seems to be a consensus in this forum the Ltd Co is a good thing. However, assuming the worst case that my contract is within IR35 I can't see much to recommend Ltd Co over Umbrella. Are there any significant factors I am missing?

Operating through your own limited company you will benefit from the VAT Flat Rate Scheme and from the 5% allowance even if caught by IR35. Both these will provide you with more than an umbrella.

Feel free to email me if you want an illustration sending to you.

Alan

[3rdknight]

Hi all, fascinating thread ... so much so that it's prompted me to add my inaugural reply!

Dragging this thread screaming and kicking back on to topic(ish) ... somewhere back along there was brief discussion about paying minimal salaries and the rest in dividends up to higher rate tax thresholds, keeping the residue in the company.

I'm just about to start contracting and getting myself organised as we speak. I seem to recall having seen some discussion in the past about monthly dividends attracting unwanted attention from HMRC ... is this true? Is it generally considered better practice to pay them quarterly?

I suffer from an exhorbitantly oppressive mortgage payment, a wife and two kids - not sure they'd appreciate me dropping to minimum wage!

[freshblue]

Originally Posted by 3rdknight

I'm just about to start contracting and getting myself organised as we speak. I seem to recall having seen some discussion in the past about monthly dividends attracting unwanted attention from HMRC ... is this true? Is it generally considered better practice to pay them quarterly?

Most of the "managed" composites e.g. Brooksons / Nixon / Giant etc pay divi's in the same timescale as the funds received so based on that frequency you get the benefit there and then. Quarterly dividends I guess could be deemed more business like e.g. you are assessing the profitability in the business before paying. Smoke and mirrors....

[Gonzo]

Originally Posted by 3rdknight

Hi all, fascinating thread ... so much so that it's prompted me to add my inaugural reply!

Dragging this thread screaming and kicking back on to topic(ish) ... somewhere back along there was brief discussion about paying minimal salaries and the rest in dividends up to higher rate tax thresholds, keeping the residue in the company.

I'm just about to start contracting and getting myself organised as we speak. I seem to recall having seen some discussion in the past about monthly dividends attracting unwanted attention from HMRC ... is this true? Is it generally considered better practice to pay them quarterly?

I suffer from an exhorbitantly oppressive mortgage payment, a wife and two kids - not sure they'd appreciate me dropping to minimum wage!

Personally, I feel that paying yourself monthly dividends could draw the accusation from HMRC that the payment is salary and therefore they are due NI (employer's and employee's) on the payments - especially if your dividends are the same every month.

However, I have seen posts on here from a respected accountant (using their own name and reputation) stating that there is nothing wrong with monthly dividends provided that they are paid out of profits. So you probably don't want to take my advice but ask a professional. Do actually ask a professional though rather than rely on messages on here!

I did not receive any salary or dividends from my company for the first six months of contracting , however I had made contingency plans for that eventuality before I took the plunge.

[3rdknight]

Originally Posted by Gonzo

Do actually ask a professional though rather than rely on messages on here!

Don't worry, I am about to book my first appointment with my accountant now! It's one of the many questions on my list...