Sharing Ltd company

[FiveTimes]

My current setup is Ltd company with myself as 100% shareholer.

I have a friend who wants to dip into the contracting market in order to build up a bit of cash before they leave the country for a fresh start down under.

Is it possible to let him use my company ? If so what would I need to do ? Make him a shareholder or employee ?

Or would it be better for him to form his own company for 12 months ?

[oracleslave]

He should set up his own in my opinion.

[Crossroads]

The easiest, cheapest and most tax efficient approach for him, and the safest for you, will be for him to set up on his own.

If he contracted via your company, how would he extract the funds? What happens if hector comes knocking after he is half way around the world?

However, after 12 months he won't be able to make full use of taper relief.

[Fran]

Hector???

[Nixon Williams]

Hector???

Hector was a character that the Revenue invented to make the taxman look more human. I think they abandoned him a few years ago!

[mace]

A friend in need

Is best avoided imho.

If he's only going to work a few months, there's plenty of umbrella companies that will put him on the payroll. Umbrella companies are specialists in this area so will be able to save your mate a lot more money in tax relief then you'd be able to work out yourself. Umbrella companies employ specialist accountants and the accountants fees are spread across multiple contractors. Your mate would be better off in the long run by having his own limited company and employing a decent accountant, but for short-term, the accountants fees would make this option less profitable.

Simply put:-

If you think you're only going to contract for less than a couple of years, sign up with a brolly, if you think you'll be pimped out for longer, get a limited company.

[scooby]

Hector???

Hector the Inspector

[NotAllThere]

Hector was a character that the Revenue invented to make the taxman look more human. I think they abandoned him a few years ago!

Yes. When they realised that Hector is also a verb.

[TheFaQQer]

Do NOT make him a shareholder - you will have to pay dividends in proportion to the shareholding, until he gets rid of the shares. You could end up paying him forever...

You could make him an employee, and put him through your payroll - effectively, you act as an umbrella for him. Nothing wrong with this, but you would need to sort out when he would get paid, plus you are taking the risk that you owe him money that you don't get (for whatever reason) from the agency or client. BUT, you could charge him a fee for this - why pay an umbrella when you could charge him to do the same service.

Safest bet all round is for him to setup as a Ltd or find his own umbrella company. For a year, it's probably not worth going Ltd (as much as that idea offends me).