Part own a company 50:50 but get paid by it as a freelancer via invoice

[VectraMan]

I've invoiced a company I was a shareholder of (but not director of) from my contracting Ltd. I never thought there was any issue with doing this; assuming it's for a service rather than as a way of getting money out of the company then I can't see anything wrong.

The problem with doing it as salary is that you should really register for PAYE, which you probably don't want to do as a one off.

But really you should get things straight with your partner.

[murky]

First thought. If you're having this much difficulty with your partner at this stage, you've got to consider whether you've gone into business with the right person.

I think the OP might consider salary to be a regular amount a month and operating PAYE. There's no reason for pay not to vary from month to month, including being zero for some months.

Ah yes - it's not my sole income and the idea has been developed by us together over the years. It ran ok as two small businesses before this - I was the technical brains and he did the invoicing and had a contact or two - but plan is to expand it.

You 've hit the nail on the head re. salary - we both assumed it had to be a regular amount. Thank you immensely - that might be the solution.

[NotAllThere]

First thought. If you're having this much difficulty with your partner at this stage, you've got to consider whether you've gone into business with the right person.

I don't understand the "too little to pay salary", but enough to pay a dividend?

I think the OP might consider salary to be a regular amount a month and operating PAYE. There's no reason for pay not to vary from month to month, including being zero for some months.

The OP could figure out with the partner a reasonable amount to cover the extra work he's doing. When the company has the sufficient funds and it's enough to make it worthwhile for the OP - pay out that amount, with tax and NI (ee and er) deducted and passed onto HMRC.

[SimonMac]

Many thanks for the replies.
The business is a web service that provides a management system for short term commmercial lets - it's bespoke, so only a few clients now.
Re income - maybe £20k p.a. but it arrives in dribs and drabs and there's very little held in the kitty.
The partner did speak to the accountant but without me being there and I'm not sure he explained it clearly. He likes to think he's the expert on everything.

So if there is very little in the kitty what would you be taking the dividend out of?

[northernladuk]

He likes to think he's the expert on everything.

Erm.. And what's wrong with that....

[murky]

Many thanks for the replies.
The business is a web service that provides a management system for short term commmercial lets - it's bespoke, so only a few clients now.
Re income - maybe £20k p.a. but it arrives in dribs and drabs and there's very little held in the kitty.
The partner did speak to the accountant but without me being there and I'm not sure he explained it clearly. He likes to think he's the expert on everything.

[SimonMac]

I don't understand the "too little to pay salary", but enough to pay a dividend?

It would make more sense to pay the money as a salary as this will reduce the Corp Tax liability of the company.

How much are we talking about here?

[TheCyclingProgrammer]

Lots of discussion on this here:
Director allowed to invoice company for his services? | AccountingWEB

The gist seems to be that the services you invoice your company for must be wholly unconnected with that company's trade or your services as a director.

The risk is HMRC could claim any payments you've received should have been subject to PAYE. I don't know how big a risk that is.

[TheCyclingProgrammer]

If you're providing your services to the business, which is clearly distinct from its business then I don't see why you couldn't invoice the company for your time either.

Why does your business partner think it is illegal? I know there's the whole IR35/office holder thing but you aren't being remunerated for being an office holder, you are charging for whatever your self employed business does.

Constantly messing around with your shareholdings seems messy to me, though you could consider dividend waivers or different share classes with professional advice.

[BrilloPad]

Preference shares?

[northernladuk]

Maybe you dnt need to get one full time but surely getting s<menpaid advice is better than screwing up. What about alphabet shares do you can divi what you want... But what are the tax implications etc..

Surely a little bit of paid consultancy would pay for itself if you get it right?

[eek]

Hi new member here..

I have a question about being a part owner of a company and also being paid by that company as a freelancer.

I'm a standard self employed web developer (trading under my own name) and have several clients, all small businesses.
With one of those people, we have set up a Ltd company to develop a project. It's owned 50/50 by myself and this other person but payments in to it are erratic and it currently operates on a shoe string.

I need to get paid for my time but the other person insists that as the company is 50/50, he must take out a matching amount when a dividend is paid.
He doesn't spend the amount of time on it that I do and agrees I need to be paid more right now. But there's too little to pay a salary.

We both hope it will generate decent sums and at that point 50/50 is fine, but right now I need to bill for my time as a freelancer - he insists this is against the law.
We don't want to get into having the acocuntant advise as the shoestring is near breaking point.

Can we keep changing the ownership shares so it goes 80% to me, 20% to him, till we get to an income of 'x' and then it goes back to 50:50?
(with a sliding scale in between)

We're not looking for cunning tax avoidance deals and personally I prefer simple self employment versus dividends, but the business idea is essentially sound.
Any other ideas or simple solutions to this?

Many thanks for any input

Just invoice the company for time spent and pay it?

[murky]

Hi new member here..

I have a question about being a part owner of a company and also being paid by that company as a freelancer.

I'm a standard self employed web developer (trading under my own name) and have several clients, all small businesses.
With one of those people, we have set up a Ltd company to develop a project. It's owned 50/50 by myself and this other person but payments in to it are erratic and it currently operates on a shoe string.

I need to get paid for my time but the other person insists that as the company is 50/50, he must take out a matching amount when a dividend is paid.
He doesn't spend the amount of time on it that I do and agrees I need to be paid more right now. But there's too little to pay a salary.

We both hope it will generate decent sums and at that point 50/50 is fine, but right now I need to bill for my time as a freelancer - he insists this is against the law.
We don't want to get into having the acocuntant advise as the shoestring is near breaking point.

Can we keep changing the ownership shares so it goes 80% to me, 20% to him, till we get to an income of 'x' and then it goes back to 50:50?
(with a sliding scale in between)

We're not looking for cunning tax avoidance deals and personally I prefer simple self employment versus dividends, but the business idea is essentially sound.
Any other ideas or simple solutions to this?

Many thanks for any input