Different business activities using ame ltd co?

[oraclesmith]

Sorry I seemed to have missed this post which is extremely helpful. Thanks for taking the time to reply. Sounds like it would be ok to re-use my Ltd co., I have one more question ... what about flat rate VAT? IT consultancy has flat rate of 13% and children's clothing 2%. But my wife would be selling clothes for young children therefore VAT would be 0%. So does that mean (a) she sells with no VAT and Ltd co pays no VAT on those sales or (b) she sells with no VAT and Ltd co pays 2% on those sales? I assume the 13% VAT rate only applies to income from my IT consulting. Cheers, Lewis.

In my opinion, I think that the flat rate scheme category applies to the main trade of your business. Which means if you have one firm, you'll effectively lose quite a bit of VAT because you'll have to purchase stock and pay VAT on it but be unable to reclaim it in the normal way.

You have to consider that one business is B2B (IT consultant - unless of course you do fixes and install for Joe Public) and another is B2C (flogging baby stuff, presumably to consumers and not to businesses). This means the VAT objectives would be different for you and you wife. She would benefit from not be VAT registered unless she has to be (to keep customer prices down), whereas most IT contractors like being VAT registered to get a bit back on the flat rate scheme.

If the baby gear business is small scale then your wife could always consider being a sole trader to start with. This means the admin is less and she pays tax like most other people. Providing she doesn't get involved with racking up big debts, then I would say this is the norm for this type of operation. It's worth considering, but you need an accountant to help you decide.

Remember that the VAT people may end up grouping your trading entitities/companies if they consider them close enough. They don't like people starting up new firms just to avoid VAT. This means your wife may be best doing business completely seperately from you. In my opinion.

[Sockpuppet]

Sorry I seemed to have missed this post which is extremely helpful. Thanks for taking the time to reply. Sounds like it would be ok to re-use my Ltd co., I have one more question ... what about flat rate VAT? IT consultancy has flat rate of 13% and children's clothing 2%. But my wife would be selling clothes for young children therefore VAT would be 0%. So does that mean (a) she sells with no VAT and Ltd co pays no VAT on those sales or (b) she sells with no VAT and Ltd co pays 2% on those sales? I assume the 13% VAT rate only applies to income from my IT consulting. Cheers, Lewis.

If you are selling zero rated items you cannot reclaim the vat on what you use to produce them (afaik).

Best idea would to speak to an accountant.

[SurfJunkie]

Amazing how things go round in circles. I started here looking for advice on pretty much the same thing, got diverted via Google to Companies House, HMRC and any number of others, before ending up at this forum.

I like the advice given above about keeping one company - makes sense to me, particularly given that both enterprises are run by people supporting each other.

My twopence worth would be to consider a name change at Companies House though - I dont think it costs much and can be done in a few days.

That way Nappy Rash Inc. and Compsoft. Inc. can become divisions / trading names of a nice generic sounding company like NRC Ltd.

See this FAQ at Companies House site
http://www.companieshouse.gov.uk/inf...pNameRes.shtml

[Lewis]

... just go with one company having two trades ...

Sorry I seemed to have missed this post which is extremely helpful. Thanks for taking the time to reply. Sounds like it would be ok to re-use my Ltd co., I have one more question ... what about flat rate VAT? IT consultancy has flat rate of 13% and children's clothing 2%. But my wife would be selling clothes for young children therefore VAT would be 0%. So does that mean (a) she sells with no VAT and Ltd co pays no VAT on those sales or (b) she sells with no VAT and Ltd co pays 2% on those sales? I assume the 13% VAT rate only applies to income from my IT consulting. Cheers, Lewis.

[DimPrawn]

Unless you have a realistic expectation of either company doing particularly well (well enough to be sold on) or particularly badly, just go with one company having two trades. You can always unravel one into a new separate company in the future if it goes well and you want it separately in anticipation of a sale.

You don't really need two bank accounts nor two sets of accounts.

Just set up your current (hopefully) simple book-keeping into cost centres or departments - off-the-shelf software like quickbooks does this very simply. Then a bill or sale can be put to the normal expense/income account, but also "tagged" to one or other business. Then you can pull off reports "by business" to achieve what is needed being analysis by business.

It also makes things easier for transfer of money between one "business" and another. The reality of it is that husband/wife will be transferring and supporting eachother - if one goes belly up, the other spouse will have to support anyway, whether different businesses or not (if you are to remain happily married!).

If you have two companies, you have to deal with everything properly. Just one example, if you share a broadband connection, whichever company that pays it would have to invoice the other - lots more examples of "duality" are obvious.

The costs savings of just one company compared with two will be high enough to accept the risks and complications of two. Only one accountant, one company formation fee, one annual return, potentially only one insurance, one data protection licence, etc etc.

As a practice, we have recommended (obviously giving the pros and cons) one company for more than one trade for several years and have never yet had a problem that couldn't be solved quickly and cheaply. In fact, our experience is that most of the "second" trades don't amount to anything and are soon forgotten.

Disagree. I did this (ran IT Contracting and other business) through the same ltd. It was a nightmare to unravel. Don't do it. I had 5,000+ bank transactions to split, piles of receipts, direct debits, two lots of PAYE, two lots of profit margins.

Setup a new limited and new bank account and keep them 100% separate. Clean, easy to track, easy to sell, easy to close, easy to grow.

[Lewis]

Thanks for all your replies. Lewis.

[marcosscriven]

So far as I know, there's nothing to stop you using different trading names, so long as on your literature, website etc, you state "Baby Clothes is a trading name of Acme Holdings Ltd)

Most people will think in terms of the trading name, not Acme Holdings.

As long as you keep your own view of the P&L separate, it doesn't matter too much if it all goes through one set of books.

[Lewis]

'Lappy & Nappy Services Limited'

[philip@wellwoodhoyle]

Unless you have a realistic expectation of either company doing particularly well (well enough to be sold on) or particularly badly, just go with one company having two trades. You can always unravel one into a new separate company in the future if it goes well and you want it separately in anticipation of a sale.

You don't really need two bank accounts nor two sets of accounts.

Just set up your current (hopefully) simple book-keeping into cost centres or departments - off-the-shelf software like quickbooks does this very simply. Then a bill or sale can be put to the normal expense/income account, but also "tagged" to one or other business. Then you can pull off reports "by business" to achieve what is needed being analysis by business.

It also makes things easier for transfer of money between one "business" and another. The reality of it is that husband/wife will be transferring and supporting eachother - if one goes belly up, the other spouse will have to support anyway, whether different businesses or not (if you are to remain happily married!).

If you have two companies, you have to deal with everything properly. Just one example, if you share a broadband connection, whichever company that pays it would have to invoice the other - lots more examples of "duality" are obvious.

The costs savings of just one company compared with two will be high enough to accept the risks and complications of two. Only one accountant, one company formation fee, one annual return, potentially only one insurance, one data protection licence, etc etc.

As a practice, we have recommended (obviously giving the pros and cons) one company for more than one trade for several years and have never yet had a problem that couldn't be solved quickly and cheaply. In fact, our experience is that most of the "second" trades don't amount to anything and are soon forgotten.

[malvolio]

That's why I said you need different P&Ls - different businesses are allowed under FRS but as you say the percentages can be different as well. Or if you're not on FRS, you still need to track it properly - for instance, aren't some kids clothes zero rated?

[Vito]

I wouldn't do it that way...

What happens if your wife's business is a huge success and she wants to prime it for a sale in a couple of years time?

What happens if your side of things is profitable but your wifes part goes belly-up and builds up debt...anyone owed money could get their hands on your cash.

How about if you want to close one of the companies in two years time for tax efficiency reasons?

On the other hand...I suppose that if your wife doesn't get near the higher rate of tax but does contribute as much in terms of effort as you, you might get away with having 50% of the company each and taking equally dividends for tax efficiency...

Personally I would keep it seperate for the pretty insignificant sums involved in running an additional company...

[scooterscot]

I remember when I applied for the flat rate scheme I was asked by the revenue what kind of business I was in ’Management consultant’ I said. I’m not so sure what they’d do if they found out otherwise, you may put your core business in jeopardy and loose the flat rate, but I don’t know. Also remember why you have the flat rate because as a service you don’t buy much raw material so you could not claim VAT? However I’d imagine the business would need to procure material for clothing.

[malvolio]

You can but it can cause complications, although probably not as many as when dealing with a totaly separate partner. It would be sensible to run two bank accounts and two separate P&Ls (so you can see which side is making what money and to keep the VAT posiotion clear) then accumulate them into one General Ledger for year end and CT billing purposes.

It also assumes the company name is suitable - would you buy a DELL babygro or a Mothercare laptop? Perhaps trading names should be reviewed...

There are no problems with accountants, BTW, that is FUD put about by certain vested interests who are looking at their own livelihood going up in smoke. High St accountants and SJD and anything in between are perfectly safe.

[Lewis]

I have a question ... can I use my Ltd company for two completely different business activities? To clarify I am an IT consultant and my wife wants to produce and sell baby clothes. Now we could obviously setup another separate business for my wife (which would make sense on many levels) but it would also be convenient to use my Ltd to reduce the admin of running two businesses (avoids two payrolls, bank accounts, end of year accounts etc..).

Would the fact my Ltd is registered for flat rate VAT be a problem? Can a company only carry on business activities as specified when incorporating/registering for Corporation Tax etc?

Any comments appreciated.

And before anyone says "ask your accountant" ... I don't have one at the moment, I'm one of those paranoid types still awaiting clarification on the meaning of "promoting an facilitating"