Startup consultancy vehicle

[andy_s]

I've taken advice elsewhere but was interested to throw it here to see people's thoughts.

You know how it goes; after 20 years in a niche domain you know it inside out, you have a solid reputation & you have a good network - now you'd like to spread out a little and work with like-minded friends/colleagues on interesting work independently.

The core group of us (5-6) work already but have enough time to have something else on the boil; it doesn't have to be immensely profitable and indeed could be almost viewed as a 'hobby' while we see where it goes. See it as a 'cooperative'. We're not competing against the big boys but can take a more nuanced approach than them.

So - I'd like to create a consulting 'vehicle' to take care of presentation and the method of paying ad-hoc consultants. Bear in mind this is a predominantly international field, so paying a French guy who lives in Spain and works in North Africa who does a trip for an American company to Kuwait for example (real situation).

Easiest and cheapest in some respects is a Ltd company in UK; something based offshore is perhaps better for handling the international aspects but is expensive (initially) for a 'hobby'. Umbrella consultant companies (payroll admin) cover everything well but again, expensive (relatively) and add a layer of complication client-side perhaps.

Anyway, business is not my forte, so I'm open to suggestions...

[jammy_basturd]

I don't pretend to know a lot about the various structures, but when I asked a previous accountant about a vaguely similar set up, the best options but to us were either Ltd or LLP.

[trickywoo]

andy_s said:

So - I'd like to create a consulting 'vehicle' to take care of presentation and the method of paying ad-hoc consultants. Bear in mind this is a predominantly international field, so paying a French guy who lives in Spain and works in North Africa who does a trip for an American company to Kuwait for example (real situation).

The only relevant thing to that statement is ad-hoc and living in Spain. Uless I've misunderstood the ad-hoc consultant will need to invoice your business entity and you will then pay them.

I'm not saying a Ltd isn't the way to go but have in mind that the first thing that happens when you set one up and register for VAT is that HMRC will assume you have set the business up for the benefit of paying them tax. You'll get lots of paperwork and requests to do VAT returns. With VAT for any invoicing within the EU you have to complete an EC Sales List as well as normal VAT return.

Depending on how much work you are doing this could take up a fair bit of time.

I'm just advising to go into it with your eyes wide open.

[StevieBee]

I'm involved in something very similar to what you are looking at. I've got my UK business but I'm part of a Consultant's collective that's run by a Brit who lives in Sofia, though the company is UK registered as a Ltd company. This employs just one person (an admin lady) and wins international contracts, the work from which is divvied out to the appropriate consultants within the company. It works very well and means we can also bill our work in sterling to a UK company.

All consultants are 'Associate Consultants'

You really just need to adopt the same approaches and safeguards you would when setting up any 'normal' company. It needs to be lead and should have some form of written agreement to which all consultants agree to.

One of the advantages are that the company can hit way above the weight and of the individual consultants could achieve.

[jammy_basturd]

Just out of interest, what makes creating and operating the company 'offshore' expensive?

[andy_s]

jammy_basturd said:

Just out of interest, what makes creating and operating the company 'offshore' expensive?

I think basically their set-up charges are higher to start with and then you inevitably pay an agent to do the work for you on top. The UK seems cheap and easy to set up but then perhaps more on-going cost.

[andy_s]

StevieBee said:

I'm involved in something very similar to what you are looking at. I've got my UK business but I'm part of a Consultant's collective that's run by a Brit who lives in Sofia, though the company is UK registered as a Ltd company. This employs just one person (an admin lady) and wins international contracts, the work from which is divvied out to the appropriate consultants within the company. It works very well and means we can also bill our work in sterling to a UK company.

All consultants are 'Associate Consultants'

You really just need to adopt the same approaches and safeguards you would when setting up any 'normal' company. It needs to be lead and should have some form of written agreement to which all consultants agree to.

One of the advantages are that the company can hit way above the weight and of the individual consultants could achieve.

Thanks - that's interesting and very much the spirit of the idea.

[andy_s]

trickywoo said:

The only relevant thing to that statement is ad-hoc and living in Spain. Uless I've misunderstood the ad-hoc consultant will need to invoice your business entity and you will then pay them.

I'm not saying a Ltd isn't the way to go but have in mind that the first thing that happens when you set one up and register for VAT is that HMRC will assume you have set the business up for the benefit of paying them tax. You'll get lots of paperwork and requests to do VAT returns. With VAT for any invoicing within the EU you have to complete an EC Sales List as well as normal VAT return.

Depending on how much work you are doing this could take up a fair bit of time.

I'm just advising to go into it with your eyes wide open.

Cheers, that was admittedly one of the main reasons to consider offshore to be honest; it's (seems) a lot simpler for what we need at the moment.

[jammy_basturd]

andy_s said:

jammy_basturd said:

Just out of interest, what makes creating and operating the company 'offshore' expensive?

I think basically their set-up charges are higher to start with and then you inevitably pay an agent to do the work for you on top. The UK seems cheap and easy to set up but then perhaps more on-going cost.

I've been beginning to look into this myself, whether it is worth moving the business to another country (currently UK Ltd + VAT reg.). As you say, start up costs seem to be more expensive, plus of course the overhead of operating in a country where you may not be familiar with the laws AND the language. However, it's a trade off compared to the fact that the current government is in no way being receptive to the needs of SMEs in the UK.

[StevieBee]

jammy_basturd said:

andy_s said:

jammy_basturd said:

Just out of interest, what makes creating and operating the company 'offshore' expensive?

I think basically their set-up charges are higher to start with and then you inevitably pay an agent to do the work for you on top. The UK seems cheap and easy to set up but then perhaps more on-going cost.

I've been beginning to look into this myself, whether it is worth moving the business to another country (currently UK Ltd + VAT reg.). As you say, start up costs seem to be more expensive, plus of course the overhead of operating in a country where you may not be familiar with the laws AND the language. However, it's a trade off compared to the fact that the current government is in no way being receptive to the needs of SMEs in the UK.

Around half our work is international and we've long looked at the logistics and benefits of setting up an overseas company and despite the burdens placed upon SMEs in the UK, we've yet to see any discernible benefits of doing so. Some countries offer very low corporation tax which is attractive but as soon as you take any money out of that country, you're hit with another tax that takes the total way above what you'd pay in the UK. Added complexities around company law, due process and the like all add to the complexity of running the business and thus cost. There are some exceptions:

We had a five year contract in the Caucus Region. The contract was structured so that consultancy time was billed in Euros and flights and expenses billed separately in Dollars. We did look at setting up a company to bill the Euros locally, keeping the money locally until the exchange rate was to our advantage and also benefiting from local tax breaks. Expenses would be billed from our UK company and so the cost of servicing the client would not impact on our cash-flow. We never got round to it but this would have made sense.

The other is that we are looking at setting up an operation in New Zealand which would require a staffed office given the distances involved.

Most countries do not permit 100% foreign ownership. Many allow only up to 49% foreign ownership so those you partner with you need to have exceptional faith and trust in.

This applies only to a consultancy business where you are selling expertise and would be different if you are selling product. And obviously, if your turnover is in the many millions then the options and advantages are wider. For SMEs, in my experience, it's quite easy to work internationally, bill international clients and move money around from within a UK company.