Been talking to a few contractor "mates", best call them acquaintances, who'd I've worked with on and off over the years about settting up a consultancy specfically to bid on tenders and the like. There about 4 of us in the core who want to set it up, but probably about 20 or so people who we'd consider working with again in future, if we have work.
I wouldn't call it an umbrella as we won't be employees and would still be free to take contracts elsewhere (with short notice periods incase something better comes up through the consultancy).
The basic idea is for us all to keep our indivdual Ltd companies, so we invoice our rates back to The Consultancy. I think it would be best described as something akin to a cross between co-operative marketing association and an agency. I.e. members would get the benefits of acting as a collective, shared costs of running an office and so on. But we'd have less issues of distributing share captial - as the profits would disappear via the subcontracted companies - i.e myself and mates, "invoicing the crap" out of our consultancy. We can also go to jobserve / agents etc to bring in extra resources if required.
The issues I'm having is deciding on the share structures so that different day rates or being benched doesn't leave anyone disadvantaged.
We could go for equal shareholdings and basically invoice net of some admin % (say 5%) so there are no profits to be distributed. Any remaining capital each year can become the companies working captial. This could be used for example to pay us non billable day rates to put bids together, attending shows and networking events, and a slush fund for any other bits and pieces required. E.g buying kit, nice web design, advertising.
I still see the problem for people being unhappy about their contributions. Eg.
Contractor A invoices £400 a day. Works 200 days bringing in £80,000. At 5% he'll pay £4,000 into the company.
Contractor B invoices £350 a day works 200 days bringing in £70,000. At 5% She'll pay £3,500 into the company.
[edit]
Contractor C invoices £300 a day works 100 days bringing in £30,000. At 5% he'll pay £1,500 into the company.
[end edit]
I guess the simple thing is to have an informal agreement that near year end - we'll let each other stick a sneaky few days in the company to get any differences back out. Or am I missing something and there is a way to pay bonuses via a contractual arrangement to the subcompnies. Eg. a loyatly bonues or such like.
PS I don't want advice that it will fail - like anything in life there's a risk, but the driving factor for this is as a consultancy with added value instead of contractor bums on seats we can bump out day rates up by several tens of percent offsetting the few percent the association will take.
Not sure how it will affect IR35 - probably won't, the end client is still going to want us as individually contractors to be onsite - thought obviously we'll try and negotiate to pull it off site 4 out of 5 days so we can all work from home collaboratively - part of the selling point. What it will most likely show is that we have marketing costs and premises via the association getting us the extra points on the new risk scoring HMRC have bought in.
Anyone tried this route, got horror stories or even successful companies that started like this. Been having a right game trying to find the right search words. Most queries return existing companies trying to sell services - not the pros and cons of setting up.
?
I wouldn't call it an umbrella as we won't be employees and would still be free to take contracts elsewhere (with short notice periods incase something better comes up through the consultancy).
The basic idea is for us all to keep our indivdual Ltd companies, so we invoice our rates back to The Consultancy. I think it would be best described as something akin to a cross between co-operative marketing association and an agency. I.e. members would get the benefits of acting as a collective, shared costs of running an office and so on. But we'd have less issues of distributing share captial - as the profits would disappear via the subcontracted companies - i.e myself and mates, "invoicing the crap" out of our consultancy. We can also go to jobserve / agents etc to bring in extra resources if required.
The issues I'm having is deciding on the share structures so that different day rates or being benched doesn't leave anyone disadvantaged.
We could go for equal shareholdings and basically invoice net of some admin % (say 5%) so there are no profits to be distributed. Any remaining capital each year can become the companies working captial. This could be used for example to pay us non billable day rates to put bids together, attending shows and networking events, and a slush fund for any other bits and pieces required. E.g buying kit, nice web design, advertising.
I still see the problem for people being unhappy about their contributions. Eg.
Contractor A invoices £400 a day. Works 200 days bringing in £80,000. At 5% he'll pay £4,000 into the company.
Contractor B invoices £350 a day works 200 days bringing in £70,000. At 5% She'll pay £3,500 into the company.
[edit]
Contractor C invoices £300 a day works 100 days bringing in £30,000. At 5% he'll pay £1,500 into the company.
[end edit]
I guess the simple thing is to have an informal agreement that near year end - we'll let each other stick a sneaky few days in the company to get any differences back out. Or am I missing something and there is a way to pay bonuses via a contractual arrangement to the subcompnies. Eg. a loyatly bonues or such like.
PS I don't want advice that it will fail - like anything in life there's a risk, but the driving factor for this is as a consultancy with added value instead of contractor bums on seats we can bump out day rates up by several tens of percent offsetting the few percent the association will take.
Not sure how it will affect IR35 - probably won't, the end client is still going to want us as individually contractors to be onsite - thought obviously we'll try and negotiate to pull it off site 4 out of 5 days so we can all work from home collaboratively - part of the selling point. What it will most likely show is that we have marketing costs and premises via the association getting us the extra points on the new risk scoring HMRC have bought in.
Anyone tried this route, got horror stories or even successful companies that started like this. Been having a right game trying to find the right search words. Most queries return existing companies trying to sell services - not the pros and cons of setting up.
?
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