Closing Ltd Co - Any other suggestions?
Discussion
As some of you may have read in the 'Contractors: Toast' thread, I have decided to accept an offer of employment (shock horror!).
This means I do not need my Ltd Co anymore, and closing it would be the sensible thing as I won't have to deal with HMRC anymore, collate paperwork, or pay £1000 a year for an accountant.
But, closing it seems a bit permanent, and I worry that there may be bits and pieces of consultancy work come up that I can do occasionally as well as my day job.
So before I speak to my accountant, I thought I would seek the ideas of the knowledgeable people of PH.
Can anyone think of any alternatives to running a Ltd Co for carrying out a few pieces of work here and there? I know some people who work as a consultant like me are set up as a Sole Trader and seem quite happy like that, but I don't know anything about being a ST.
Thanks
This means I do not need my Ltd Co anymore, and closing it would be the sensible thing as I won't have to deal with HMRC anymore, collate paperwork, or pay £1000 a year for an accountant.
But, closing it seems a bit permanent, and I worry that there may be bits and pieces of consultancy work come up that I can do occasionally as well as my day job.
So before I speak to my accountant, I thought I would seek the ideas of the knowledgeable people of PH.
Can anyone think of any alternatives to running a Ltd Co for carrying out a few pieces of work here and there? I know some people who work as a consultant like me are set up as a Sole Trader and seem quite happy like that, but I don't know anything about being a ST.
Thanks
Lord Marylebone said:
But, closing it seems a bit permanent, and I worry that there may be bits and pieces of consultancy work come up that I can do occasionally as well as my day job.
Can anyone think of any alternatives to running a Ltd Co for carrying out a few pieces of work here and there? I know some people who work as a consultant like me are set up as a Sole Trader and seem quite happy like that, but I don't know anything about being a ST.
I was a sole trader for 25 years. It's the easiest way there is. Do work, send invoice, get paid, account for it, pay income tax if required. If you don't want to do your own tax stuff (I never have), find a decent book-keeper.Can anyone think of any alternatives to running a Ltd Co for carrying out a few pieces of work here and there? I know some people who work as a consultant like me are set up as a Sole Trader and seem quite happy like that, but I don't know anything about being a ST.
You can place the company into dormancy which is a bit like SORN for business - then just wake it up if things change later on. That though wouldn't be suitable for the odd ad-hoc job which, as Simpo says, should be easy enough to run as a Sole Trader - providing you're not exposed to financial risk.
StevieBee said:
You can place the company into dormancy which is a bit like SORN for business - then just wake it up if things change later on. That though wouldn't be suitable for the odd ad-hoc job which, as Simpo says, should be easy enough to run as a Sole Trader - providing you're not exposed to financial risk.
Yes, financial risk is the only major concern I guess. I have professional insurance, but even so, I don't really like the idea of making a significant blunder and being personally liable.Some other consultants I work with are Sole Traders so I imagine they aren't too concerned about this. They have been doing it for decades and seem to think it is fine.
jeremyc said:
Have you checked how happy your new employers would be with you doing a few "jobs on the side"?
It may be that you will have no need for the limited company, so close it or make it dormant.
Yes. I have checked, and they are fine as long as it doesn't interfere with their work, and I don't pinch their customers.It may be that you will have no need for the limited company, so close it or make it dormant.
They are quite flexible, and have little bureaucracy thankfully. As long as the work gets done and everyone gets paid. My employment contract was one page, and contained very few restrictions. Pretty much "Everything you do whilst at work is confidential in nature. Don't pinch our intellectual property, and please give us a minimum 1 month notice if you are leaving"
Some of the other directors/employees also run other companies 'on the side'.
In short: It would be fine.
Lord Marylebone said:
StevieBee said:
You can place the company into dormancy which is a bit like SORN for business - then just wake it up if things change later on. That though wouldn't be suitable for the odd ad-hoc job which, as Simpo says, should be easy enough to run as a Sole Trader - providing you're not exposed to financial risk.
Yes, financial risk is the only major concern I guess. I have professional insurance, but even so, I don't really like the idea of making a significant blunder and being personally liable.Some other consultants I work with are Sole Traders so I imagine they aren't too concerned about this. They have been doing it for decades and seem to think it is fine.
I have a share in an EU based business with a group of others that operate in the same field but under different disciplines. This enables me to bid for and work on EU financed contracts that my UK business would not have access to (post Brexit) and is also useful for individual assignments where a company is needed outside of the UK. It retains 15% of each contract value to cover admin cost and an annual piss up.
If you have a good network of those in a similar position, might be worth looking at setting up something similar. You get the benefit and protection of a limited company but at a cost proportional to the number of 'owners'.
Eric Mc said:
Adequate insurance might be sufficient for you to be able to operate relatively risk free as a sole trader.
Some possible customers may PREFER to do business with limited companies rather than sole traders though.
I've never understood this. Why trust a limited company that is 'protected' if they screw up, but not a sole trader that you can take to the cleaners?Some possible customers may PREFER to do business with limited companies rather than sole traders though.
As for indemnity etc, simply state in writing what you are going to and for how much, then do it. Don't promise stuff you can't deliver.
Simpo Two said:
I've never understood this. Why trust a limited company that is 'protected' if they screw up, but not a sole trader that you can take to the cleaners?
As for indemnity etc, simply state in writing what you are going to and for how much, then do it. Don't promise stuff you can't deliver.
I cannot give you an answer with regards to companies trusting Ltd Co's but not Sole Traders, but with regards to indemnity, it isn't that simple unfortunately.As for indemnity etc, simply state in writing what you are going to and for how much, then do it. Don't promise stuff you can't deliver.
I project management stuff that is in the tens of millions, and it is entirely possible that I could make a small mistake that could end up costing £500k or whatever. It happens. I have seen it happen.
It isn't just a case of saying don't promise what you can't deliver. Anyone can make a mistake or an oversight, or something goes wrong and you get blamed, or someone else messes up on your behalf as a sub contractor etc.
I think anyone who was professional would pride themselves on delivering, but it's protecting yourself against the unforeseen that is important.
Simpo Two said:
I've never understood this. Why trust a limited company that is 'protected' if they screw up, but not a sole trader that you can take to the cleaners?
As for indemnity etc, simply state in writing what you are going to and for how much, then do it. Don't promise stuff you can't deliver.
Up until the latest twist in the long running IR35 tale, the "employers" wanted contractors to operate through limited companies so that the employers were absolved of any tax, NI or employment law obligations.As for indemnity etc, simply state in writing what you are going to and for how much, then do it. Don't promise stuff you can't deliver.
Lord Marylebone said:
I project management stuff that is in the tens of millions, and it is entirely possible that I could make a small mistake that could end up costing £500k or whatever. It happens. I have seen it happen.
Furry nuff. PI cover might prove more expensive than keeping the company and going dormant.Eric Mc said:
Up until the latest twist in the long running IR35 tale, the "employers" wanted contractors to operate through limited companies so that the employers were absolved of any tax, NI or employment law obligations.
That makes sense - for IR35 cases anyway.Eric Mc said:
Up until the latest twist in the long running IR35 tale, the "employers" wanted contractors to operate through limited companies so that the employers were absolved of any tax, NI or employment law obligations.
I presume that, should the "employer" (I might prefer the term "client") consider the contract to fall outside IR35, this would still be the case - would that be correct?Simpo Two said:
I've never understood this. Why trust a limited company that is 'protected' if they screw up, but not a sole trader that you can take to the cleaners?
A sole trader might be a young chap still living at home with mum and dad and no assets of any value so taking someone like this to the cleaners would yield nothing other than a bit of paper to say they cocked up. A Ltd company conveys at the least a modicum of formality and a better likelihood of resolution should something go amiss.Public sector clients prefer not to deal with Sole Traders because if something does go wrong, they end up suing an individual, the optics of which do not look good politically speaking.
I suspect too that the government (HMRC) would prefer all business to be done via a Ltd company and this may permeate through procurement policies across all public sector institutions which is why a local Father - Son Painting and Decorating business looses out on a contract to paint the municipal bogs in the park to some global Facilities Management company at four times the price.
StevieBee said:
A sole trader might be a young chap still living at home with mum and dad and no assets of any value so taking someone like this to the cleaners would yield nothing other than a bit of paper to say they cocked up. A Ltd company conveys at the least a modicum of formality and a better likelihood of resolution should something go amiss.
But the director of said Ltd Co might also be an 18 year old still living at home with mum and dad and no assets of any value. Many limited companies seem to specialise in having no assets, putting them all in the wife's name, changing the name etc. If I was dodgy the first thing I'd have done was set up a Ltd Co. StevieBee said:
Public sector clients prefer not to deal with Sole Traders because if something does go wrong, they end up suing an individual, the optics of which do not look good politically speaking.
It also saves them having to think. After all, why think or make a judgement when you can just obey 'policy' - then when you screw up they can't sack you for being useless. But that's why they're in the public sector.StevieBee said:
I suspect too that the government (HMRC) would prefer all business to be done via a Ltd company and this may permeate through procurement policies across all public sector institutions which is why a local Father - Son Painting and Decorating business looses out on a contract to paint the municipal bogs in the park to some global Facilities Management company at four times the price.
Indeed - which rather proves the point You know it's stupid, I know it's stupid, and secretly they might even know it's stupid, but they do it anyway.Once upon a time, setting up as a limited company was a bit of a big deal - with all sorts of complicated aspects that needed to be gone through before being able to set the company up.
There were minimum numbers of directors and shareholders.
There was the requirement to have a formal Company Secretary.
There was the requirement to have a full-on statutory audit carried out by qualified accountants.
Over the past 30 odd years, the legal hurdles designed to make operating a company difficult and onerous have been removed. These days, it is perfectly possible (and common) to have a true "single person" company - which is, in reality, an oxymoron when the meaning of "company" is properly understood.
Therefore, institutions that historically dealt only with companies would have done so on the understanding that all these old style formalities had been gone through and that the annual figures were properly scrutinised by outside third parties.
In the current "cowboy" era of limited companies, the kudos of being able to operate through a limited company has long since faded away.
The problems that led to the creation of IR35 are a direct consequence of the abolition of the old restrictions. Suddenly, the "one man band" company became completely feasible.
There were minimum numbers of directors and shareholders.
There was the requirement to have a formal Company Secretary.
There was the requirement to have a full-on statutory audit carried out by qualified accountants.
Over the past 30 odd years, the legal hurdles designed to make operating a company difficult and onerous have been removed. These days, it is perfectly possible (and common) to have a true "single person" company - which is, in reality, an oxymoron when the meaning of "company" is properly understood.
Therefore, institutions that historically dealt only with companies would have done so on the understanding that all these old style formalities had been gone through and that the annual figures were properly scrutinised by outside third parties.
In the current "cowboy" era of limited companies, the kudos of being able to operate through a limited company has long since faded away.
The problems that led to the creation of IR35 are a direct consequence of the abolition of the old restrictions. Suddenly, the "one man band" company became completely feasible.
Eric Mc said:
Over the past 30 odd years, the legal hurdles designed to make operating a company difficult and onerous have been removed.
Until last year, the last time I opened a business bank account was in 2003 and a process that required my business partner and I presenting ourselves at the bank, meeting with the commercial manager, explaining our business plan and providing documents to prove we existed (!). From memory, it took about two weeks before we had an account we could use. Last year I opened one almost instantly via an app.
The convenience is certainly welcome but does seem to undermine the kudos of business a tad.
StevieBee said:
Until last year, the last time I opened a business bank account was in 2003 and a process that required my business partner and I presenting ourselves at the bank, meeting with the commercial manager, explaining our business plan and providing documents to prove we existed (!). From memory, it took about two weeks before we had an account we could use.
Last year I opened one almost instantly via an app.
The convenience is certainly welcome but does seem to undermine the kudos of business a tad.
Sorting out bank accounts is a slightly separate area as different banks have different rules and procedures. Last year I opened one almost instantly via an app.
The convenience is certainly welcome but does seem to undermine the kudos of business a tad.
I was thinking more of the statutory position regarding the law, which reflects government policies over the decades. It was a deliberate plan by successive government to make entrepreneurship easier by removing statutory roadblocks to establishing limited liability.
The downside of this is that is has encouraged arrangements which are not true business to business arrangements to flourish and has blurred the lines between true employment and all the other possible permutations of how we arrange working for each other.
This has created a mass of court cases surrounding tax, NI, employment rights issues etc.
BobsPigeon said:
You have to close it down to take advantage of the capital gains allowance which you'll probably want to do if you have any money retained in the company.
That is what I have decided to do.Spoke to the accountant today and he actually recommended closing down, and going sole trader if required,, or just starting a new Ltd Co if needed as it’s so quick and easy.
I have quite a chunk of money in the business, but the accountant is confident I can get most of it out without being losing much, if anything. The wife is owed a significant amount of tax-free redundancy pay for starters (idea stolen from the ‘Contractors’ thread and approved by the accountant).
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