Advice for two contractors setting up an online business.

[woohoo]

Hi everyone,

Along with another contractor I’m setting up an online business. We are well into the development and are now thinking about the legal and accounting side of this venture.

Are there any legal / accountancy issues with two limited companies setting up an online business under a trading name? General question I know just after any useful information.

Does anyone have experience of doing something similar, if so any advice?
How easy is it to get a merchant account in this type of scenario?

When the online business starts making money and I want to take cash out, do i just transfer it from the merchant account to my company account and treat it like normal income from a client?

Thanks for any advice.

[philip@wellwoodhoyle]

Well, for a start, you need to decide on the legal structure of the new online business. Is it going to be a third limited company, owned 50:50 by each of your current companies, or is it going to be a partnership with both companies being equal partners? Either way, it will need it's own tax registrations, accounts, etc.

You have to make it clear to customers and suppliers exactly who they are contracting with so you'll have to put either the third/new company details on the website etc., or say that it's a partnership between A Ltd and B Ltd, giving the partnership name and official address.

Another option is for it to be a limited company or partnership owned by the two of you personally, so leaving your existing companies outside completely.

Whatever way you do it, you also need some form of shareholder/partnership agreement setting out what happens if there are disagreements, if one party doesn't pull their weight, distribution of profits, and what happens if one partner wants to leave or dies. Best to sort all this out in advance to avoid costly and damaging arguments later on.

You really need some decent advice re this - have you talked to your respective accountants and solicitors.

[woohoo]

Well, for a start, you need to decide on the legal structure of the new online business. Is it going to be a third limited company, owned 50:50 by each of your current companies, or is it going to be a partnership with both companies being equal partners? Either way, it will need it's own tax registrations, accounts, etc.

You really need some decent advice re this - have you talked to your respective accountants and solicitors.

No I havent talked to my accountant or solictor yet, I'm asking here really to get some kind of understanding before I talk to them.

Regarding the structure I was thinking initially that our two companies would be equal partners, it seemed the cheaper option. However, I have a fair amount of money in my limited company and it may be better to setup a third ltd.