Reply to: 1 limited company with 2 fee-earning employees vs. 2 separate companies

[pr1]

Remember also for the FRS that to initially qualify your expected turn over should be 150k. However the limit before you have to exit is 250k I believe.

230k
https://www.gov.uk/vat-flat-rate-scheme/eligibility

[Underbase]

Remember also for the FRS that to initially qualify your expected turn over should be 150k. However the limit before you have to exit is 250k I believe.

[Contreras]

Well if people are bothering to search ...

VAT - You would probably both be VAT registered anyway so the VAT threshold is not an issue. Flat rate scheme can easily work - use different rate for each different income stream.

This is no longer the case (assuming it ever was).

"Choose the sector for which your business gets the greater part of its turnover. Do not split your turnover, or apply more than one percentage." - VAT Notice 733

[fool]

I'm still waiting a response from him

Meanwhile, I would like to have different points of view.

Mines said bung it into one and I did.

[Parmesan]

What does your accountant suggest?

I'm still waiting a response from him

Meanwhile, I would like to have different points of view.

[northernladuk]

Another one thread bump again...

Currently, I'm in a similar situation: I'm a contractor working with my Ltd Company and now my partner is moving from perm to contract.

She already found a client and we were thinking of using my Ltd Company to sign her contract.

But I have some doubts:

Can she be just a shareholder of my Ltd Company and work for her client? Or she should be another one more employee in my Company? And what about if she is a director also?

About the FRS, at the moment we will be below the limit because I'm under the rate in the current Contract. In the next Contract, I could be in a bigger rate and then exceed the FRS limit.

Is it a big difference being below or above the FRS limit? In terms of percentages, what is the approximate difference?

What does your accountant suggest?

[Parmesan]

Another one thread bump again...

Currently, I'm in a similar situation: I'm a contractor working with my Ltd Company and now my partner is moving from perm to contract.

She already found a client and we were thinking of using my Ltd Company to sign her contract.

But I have some doubts:

Can she be just a shareholder of my Ltd Company and work for her client? Or she should be another one more employee in my Company? And what about if she is a director also?

About the FRS, at the moment we will be below the limit because I'm under the rate in the current Contract. In the next Contract, I could be in a bigger rate and then exceed the FRS limit.

Is it a big difference being below or above the FRS limit? In terms of percentages, what is the approximate difference?

[Clare@InTouch]

Thanks guys, great info. Good to know it's doable. Waiting for my accountant to get back to me with some figures, shouldn't be too much.

If it is a fair amount then you could always do it yourself.

Check out software like Moneysoft. Cheap as chips, user friendly, way better than HMRC software and does everything you could ever need. You'll then just need to set up salary and run RTI each month, and perhaps ask for a bit of help from the accountant at year end to do the P35 and P11D.

[mikedarv]

Thanks guys, great info. Good to know it's doable. Waiting for my accountant to get back to me with some figures, shouldn't be too much.

[Craig at Nixon Williams]

I agree with Clare – doing it through your company (providing that it doesn’t push you over the FRS limit) will be cheaper than using an umbrella company or using a separate company so go for that. The accountant may charge a little bit for the extra paperwork (I know we would) but that will be a fraction of her doing it through a different entity.

Craig

[Jessica@WhiteFieldTax]

Its swings and roundabouts. If you have an accountant talk to them, if you don't , find come and talk to them, and get some consensus from there.

Sometimes there are no rights and wrongs, just preference.

[Clare@InTouch]

Sorry old thread bump (but at least I searched)

Just wondering if this is still the case for having 2 contracts under 1 company.

My partner will be leaving her permie job and looking at joining a friends company under a contract, relatively low circa £120 p/d. It would be in marketing/research whereas I am strictly IT so just trying to work out if it would be feasible for her to contract under MyCo Ltd rather than starting on her own or an umbrella.

Would my accountant want to charge a little extra? We're unmarried should that affect any tax thresholds.

Your partner could contract via your company, and your company can then pay her a wage in return. The wage could be calculated to ensure your company doesn't lose out from an Employer's point of view. The company would issue invoices to her clients, adding VAT if appropriate. Check that her income won't push you over the FRS limit, if applicable.

Don't forget your obligations as an employer too - holiday pay, sick pay, SMP, contracts, dismissal rights, employer's liability insurance etc.

Your accountant may charge more - best to check with them how many people they will run payroll for.

You could of course issue shares and pay dividends, but I wouldn't advise it. There are a few threads about that subject quite recently so happy reading on that one!

[mikedarv]

Sorry old thread bump (but at least I searched)

Just wondering if this is still the case for having 2 contracts under 1 company.

My partner will be leaving her permie job and looking at joining a friends company under a contract, relatively low circa £120 p/d. It would be in marketing/research whereas I am strictly IT so just trying to work out if it would be feasible for her to contract under MyCo Ltd rather than starting on her own or an umbrella.

Would my accountant want to charge a little extra? We're unmarried should that affect any tax thresholds.

[Ganesh]

I would tend to be in favour of just one company.

VAT - You would probably both be VAT registered anyway so the VAT threshold is not an issue. Flat rate scheme can easily work - use different rate for each different income stream.

Corporation Tax - H & W are "connected persons", so the tax thresholds etc are halved for each company, so the issue of exceeding a threshold are irrelevant.

Tax Loss Relief - This could be useful. If you have 2 cos, one makes a profit, the other a loss, there is NO setoff one against the other. But if you have 1 co with two trades, you can set a loss against the profit, so greater potential for loss relief.

Different Earnings - You can pay different wage levels or use A&B shares - pay different rates of dividends to different classes of shares - this still works perfectly if set up properly.

Other - You may get a PI policy that covers both, so saving money. Acctcy fees will almost certainly be far less. Bank charges will be less and credit interest more (i.e. one bank account instead of 2). A lot less hassle overall in dealing with just one company instead of 2. Book-keeping is not a problem - easy enough to split each transaction between trades (after all contracting bookkeeping is simple anyway).

So unless there is a damn good reason for having 2, I'd say go for just the 1.

I too tend to think along these lines. Why have twice the hazzle?
regards,

[philip@wellwoodhoyle]

I would tend to be in favour of just one company.

VAT - You would probably both be VAT registered anyway so the VAT threshold is not an issue. Flat rate scheme can easily work - use different rate for each different income stream.

Corporation Tax - H & W are "connected persons", so the tax thresholds etc are halved for each company, so the issue of exceeding a threshold are irrelevant.

Tax Loss Relief - This could be useful. If you have 2 cos, one makes a profit, the other a loss, there is NO setoff one against the other. But if you have 1 co with two trades, you can set a loss against the profit, so greater potential for loss relief.

Different Earnings - You can pay different wage levels or use A&B shares - pay different rates of dividends to different classes of shares - this still works perfectly if set up properly.

Other - You may get a PI policy that covers both, so saving money. Acctcy fees will almost certainly be far less. Bank charges will be less and credit interest more (i.e. one bank account instead of 2). A lot less hassle overall in dealing with just one company instead of 2. Book-keeping is not a problem - easy enough to split each transaction between trades (after all contracting bookkeeping is simple anyway).

So unless there is a damn good reason for having 2, I'd say go for just the 1.