New Venture formation advice

[tompipe]

Hi,

A friend and I both trade using Ltd companies (A and B). However, we are venturing into a new area of business which we will be working on together and would like to isolate this from our own companies, and also give it a separate identity (C), but we are confused about how to set up correctly/efficiently, and have had conflicting advice regarding structure.

Some advice inferred that if we set up C as a Ltd company, with us each as human directors/shareholders, then all 3 companies may become linked, definitely for VAT purposes and possibly in other ways as they are under common control?

Another piece of advice was to form an LLP with corporate members. To me, this seems the most appropriate option, A and B could invoice C for services (at a market rate) and any profit left would be paid to A and B, and is then up to shareholders of each where that goes.

What are the benefits/consequences of each, or are there any other options we should be considering?

Thanks in advance.

[GlobalTaxAdviser]

There is little chance of being linked if you have a totally different business and structure so wouldn't worry about that

There maybe tax reasons why a LLP or Limited company is preferable

I would make sure you have the proper agreements setup in place if you are venturing into business with someone else

Kind Regards

GTA

[tompipe]

There is little chance of being linked if you have a totally different business and structure so wouldn't worry about that

There maybe tax reasons why a LLP or Limited company is preferable

I would make sure you have the proper agreements setup in place if you are venturing into business with someone else

Kind Regards

GTA

Thanks GTA - it's a very similar field in some aspects, so to a non technical person, they may be seen as doing the same/similar work. Not sure if that makes any difference?

Absolutely will be having proper agreements drawn up, it's highly unlikely to breakdown and cause problems between us, but I'm sure many many people have said that before me, then wished they had an agreement to fall back on!

Do you have any idea what tax reasons would make one preferable over the other?

Cheers

[GlobalTaxAdviser]

Hi

You have to forecast profits and then see if a Limited company would be better based on 20% Corporation tax and dividends or self assessment tax at 20% ,40% or 45% and National Insurance (9% + 2%) for a LLP.

Kind Regards

GTA

[AnthonyR]

Just to add to GTA's points, the question of whether your businesses will be linked for VAT purposes depends on how many connections there are between the business.

HMRC give their guidance here: https://www.gov.uk/government/publicati ... ice-4-1983

In practice, it looks at whether there is shared premises/equipment/customers/employees/financial links.