Company formation advice

[NomDePlum]

Hi,

I am in the situation where I have been contracting for about a year now under a limited company. At present I am the only employee of this company and I am at the stage where managing it is relatively easy and I feel I have a good understanding of what is require to do this. I gain my work through the normal agency route.

Myself and another are considering forming a company at present. This other person has good contacts into a specific area and we are hoping to exploit that. The idea is the we set up another limited company together and at the point where my current contract ends I move over into this compnay full-time effectcively leaving my old company behind. We intend to have direct contracts with clients and also to develop products as opposed to going down the agency route. We are also hoping to expand the company as we go.

For my previous company I went through SJD Accountancay to set it up and register for VAT, PAYE etc. I was pretty happy with this service.

For the new 'shared' company I am anticipating requiring a fuller service to advise on the structure and make up of the company. Would this be correct and if so what areas would require fuller advice, what are the pitfalls/options and can anyone recommend where we would get such advice?

[chicane]

I would suggest that you don't go into this lightly. Although you have been "running your own company", the reality of going into business with somebody else is very different.

You need to be very clear about each of your roles and responsibilities, what you both want out of the company, the amount of effort each of you is willing to put in, and the financial renumeration expected - based not only on the ongoing contribution, but what each you is willing to put in at the beginning (e.g. the contacts that you describe). Also, if either of you decide to leave before the company runs its natural course, how are the assets (financial and intellectual) going to be split?

The moment you make any assumptions about each others' expectations is the moment you're setting yourselves up for petty arguments down the line. I've seen a number of promising companies made up of 2-3 people go down the pan because people don't discuss the fundamentals before they get started.

What I'm trying to say here is that you seem to be jumping the gun - thinking about high-level company structure concepts before thinking about how things will work day-to-day working with each other. My apologies if this is not the case.

[Orangutan]

You also need to think carefully about what happens when 1 of you is bringing the money in and the other isn't, you'll have to be consistent with the payment of dividends, regardless of who is generating the profit.

[r0bly0ns]

This is exaclty how me and my business partner operate, although niether of us had a company before.

We used Upton and Co (formerly 1st Accountancy) to set up the company and give us advice.
I don't think there was that much more work involved in setting up for us than setting up for someone on their own, but the advice they have given us has been invaluable.

As said above though, make sure you sort out the little day to day things first!
It seems daft but something as trivial as how many days holiday you expect could get arkward if one of you starts to feel the other is taking too many.....

[oraclesmith]

If it's primarily your mates arena, then (if I were you) I'd let him/her set up the limited on their own and then have my company be a supplier to it. If he/she needs investment then this could be company to company too. That way you are at arms length if it all goes t*ts up.

It depends a lot on whether it's got the potential to go really big, in which case it might be better to get on board from day one as a shareholder.
Do you feel lucky ?