Nick.. started this topic @ 21:56 on 29/03/2006
Hi There,
I am looking to start up a Ltd company so that I can invoice customers directly for work that I carry out.
I have a few questions, my apologies if these are a little basic...
1- Is it possible to start a Ltd company whilst remaining employed PAYE full time?
2- Any work I get is in-frequent and always varying in amounts, although the hope is this would grow sufficiently to give up ones day job, but would it be possible to open a bank account in the name of my Ltd company and have my PAYE salary transferred into it? or would I need to justify this in some way? would it be viewed as turnover and be subject to any additional tax?
3- Would I need to be seen to be earning a certain amount through the Ltd company or could it sit dormant for long periods? (apart from my salary from my PAYE job and any additional money I pay into that account unrelated to work carried out in its name?)
Thanks for any assistance with this
Nick
RE: Ltd. company questions
gfoz | 29/03/2006 10:42 PM
Hi Nick, I'm not a pro at this, but I'd say:
1. Definitely. I did, before leaving full time employment.
2. I'm sure this wouldn't cause a problem, but to keep your finances as straight forward, I would certainly keep personal and business accounts separate from one another.
3. I'm not aware that there's a 'minimum' amount one should earn (think of all those companies who make a loss in their first year(s) of trading) and as for dormant, as long as you continue to submit quarterly VAT returns etc I can't see the revenue minding that there's little activity
Oh, and if I didn't emphasise it enough, keep your personal and business finances separate!
Just my two penneth!
Gordon
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Set price Product">href="http://www.southphotography.co.uk">Product Photography and packshots for catalogues and e-commerce
RE: RE: Ltd. company questions
Nick.. | 29/03/2006 10:58 PM
Thanks for taking the time to reply with that advice
I completely understand the logic in keeping the finances seperate, but I was hoping by having my salary paid in to the Ltd company account, that I may be able to build up some history with the bank so I would be able to obtain an overdraft or other form of credit sooner than if I had a trickle of secondary income, which I understand is impossible on a new startup
I was hoping that this may speed things along a bit, as essentially my current employers would just be treated as another client if I became busy enough to leave, so what I now get as a salary, I'd invoice for under my companies name within the next year or so. I just don't want to leave PAYE in the short term
So any thoughts on whether this is worthwhile in terms of generating some good history with the bank under my companies name?
Hope this makes sense !
Thanks
Nick
RE: Ltd. company questions
gfoz | 29/03/2006 11:03 PM
There are plenty of banks that will be falling over themselves to give you a free overdraft (to start with) as well as other bells and whistles to entice you to bank with them, so you may not need to worry if it's a relatively small overdraft you're looking for. (I hear the co-op bank is a no-brainer when it comes to business banking). Otherwise, if you're looking for more credit/a loan then a sound business plan and a meeting with the small business advisor/bank manager could be the thing that helps swing it for you with the bank.
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Set price Product">href="http://www.southphotography.co.uk">Product Photography and packshots for catalogues and e-commerce
RE: Ltd. company questions
James Smith | 30/03/2006 09:55 AM
Hang on there, you can’t simply treat a limited company as your own private bank account.
You are going to get into all sorts of problems if you try and have your salary paid in, and then presumably use this account to meet your daily expenditures.
Moreover you can’t just invoice your current employer for your salary unless you have a clear legal change in status to a contractor from an employee. There are a whole raft of regulations in this area to avoid tax dodging.
The question to me is why do you want a limited company at this early stage? You are taking on a significant burden in terms of complexity and cost and for what benefit?
If you have only a small number of customers you could have a limited company, but more normally you would simply trade as a 'sole trader' to keep things simple. There may be a case for a limited company from a credibility point of view, but only if you know what you are doing and accept fully what you are taking on. Please be careful - it is deceptively easy to set up comany, a lot harder to run it properly.
Have a look at the main sections of this site and the business link website about business structures to get some more background.
Finally on banks - banks don’t really give a stuff about you - I wouldn’t worry about trying to build up credibility. Your personal credit score will do all the talking. Moreover if as it sounds you are a in service industry then the bank will have very little involvement in your day to day affairs. It should just be transactional, no real reason for debt.
Hope this helps.
Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Ltd. company questions
gfoz | 30/03/2006 10:00 AM
Ah, I hadn't read it that way - yep, if you're looking at invoicing your current employers through the Ltd company, the revenue will be breathing down your neck in no time (they have a load of guidance on this - search 'IR35' on the revenue's site).
Hope that's not what you were intending though!
Cheers,
Gordon
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