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Contracting & running a seperate company

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    Contracting & running a seperate company

    I want to continue contracting but also set up a very small online business in a completely different area. Has anyone else gone through this? I am unsure whether I can set this up as a sole trader etc. Do I need to speak to a solicitor who specialises in contracting or can a general solicitor help with setting th elogistics of doign both, or even better can I do it myself?

    #2
    Contracting & running a separate company

    It is possible for one business entity (e.g. a limited company) to carry out more than one business activity so the mere fact that the new activity is in a completely different area does not automatically mean that a new business entity needs to be created (although obviously there will need to be new standard terms, contracts etc for the new activity).

    Whether the new activity should use a new business entity, such as a sole-tradership, rather than the existing limited company depends on a number of factors the importance of which will vary for person to person. Such factors include: whether "limited liability" is important and the extent to which a limited company can provide true limited liability, taxation - depending on the circumstances one entitlty may have advantages over another, National Insurance contributions and to what extent you are relying on the state pensions or whether NIC for you would be effectively a tax, and finally VAT.

    VAT registration occurs at the entity level (i.e. if a limited company or an individual is VAT registered, the registration will apply to all its activities unless exempt)so if, for example the limited company is VAT registered and it is desired that the new business activity should not be VAT registered (e.g. to increase its price-competitiveness if it sells mainly to non-VAT registered customers) then a new entity (e.g. sole-tradership or second limited company/LLP) will be needed.

    There is no one-size fits all answer to these questions and advice from an accountant or from a commercial lawyer (rather than a generalist lawyer) is to be recommended.

    John Antell

    www.john.antell.name

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      #3
      Re: Contracting & running a separate company

      The VAT thing JA raises is probably the most important one.

      Perhaps another important question is:- what does very small mean? If it is is just a few k, and you do not see it really expanding from that, then it might be better just doing it through your contracting company rather pay another lot of accountant's fees, insurance etc, and doubling up on effort of all the paperwork like end of year returns.

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