Diversifying?

[Mustang]

Mrs Mustang is looking at the possibility of setting up a company/franchise to provide swimming instruction. Ultimately she will set this up as a seperate company but in the meantime we were talking about her establishing it as part of MyCo and using MyCo funds to make initial investments.

What is the best way of going about this so that it could become a seperate business?

Would I have to notify Co House that the class of business has changed?

All advice welcome.

[MrsGoof]

A relation of mine set a co. for teaching swimming, initially he went sole trader and latterly limited when he started employing people.

If you add the Swimming thing to your Co. then you'll have to consider insurance. When I used to teach and coach my ISTC insurance covered me only and not a company (that was a good few years ago, ISTC are probably something else now).

[oraclesmith]

Your memorandum of association will probably be so broad that you could do all sorts of trading under your company name. You can also have additional SIC codes on your company record to cover the swimming instruction. However, I can think of a few reasons why this might not be such a good idea :-#

(a) it might affect your VAT situation if you are on the flat rate scheme.

(b) it might affect any insurances you have in place for the business because they may be based on the IT contracting business and not swimming coaching (which has different risks).

(c) you may be exposing your main company to any additional risks inherent in swimming coaching - eg. getting sued for someone drowning whilst in your wifes care. I dare say there are swimming coach insurances that could be taken out but I guess your company would still be liable for any bad debts incurred as a result of problems with her activities.

(d) Branding. It might be better to think about branding and trading names, domain names etc up front based on swimming coaching, rather than have swimming customers dealing with an inappropriately named firm - eg. MyCo Technology Solutions Limited.

[Mustang]

Good points so far! Any more from anyone else?

I guess there is nothing preventing MyCo investing in HerCo to help with start up costs. Would that be done by MyCo being a shareholder or by investing capital, or both?

TIA

[XLMonkey]

Good points so far! Any more from anyone else?
I guess there is nothing preventing MyCo investing in HerCo to help with start up costs. Would that be done by MyCo being a shareholder or by investing capital, or both?
TIA

Strictly speaking, there is no difference between being a shareholder and investing capital.

You should speak to an accountant, but probably your best option is to set up the company however you want, then have yourco lend herco the money.

At the end of the financial year, herco should then pay back some of the money/interest on it, OR, convert the loan to shares in the company (you can set a value on the shares to enable you to control the percentage of herco that ends up being owned by yourco).

That's what Roman Abramovich did, anyway.

[DimPrawn]

Setup a new ltd.

I initially ran Plan B under my IT contracting company. Big mistake.

An account will setup a new company for nothing or next to nothing. Trust me, don't try and run different types of business under one ltd.

[Paddy]

You can “Trade as (NAME) from a limited company. The company that I use covers all ventures from processing turkeys to buying and selling property. It think it would be wise to use the same company as you will offset expenses.

[TheFaQQer]

You don't need to inform Companies House - it's the main activity of the business that they are interested in. Same for the VAT registration - if you're on flat rate scheme then it's based on the main income generator for the business.

Most of the insurance you may have will only cover the insurance side of the business - most insurance companies will offer cover for part of the business, so I have separate insurance for my part of the company than my wife does for her part.

As to whether you should do this - it depends on how likely the second part is to make any money. My wife's side of the business is a long way from turning a profit - so it's part of my Ltd co. This allows the startup costs to be offset from the profits from one side of the company, and she also draws a salary from the company as recognition for her role in building up that part of the business. If it goes pear shaped, or doesn't start to show some money soon, then we'll probably cut her salary and close that part of the business down.

You can always have a "Trading As" name for the business - Mrs. F has a completely different trading name from my brand, which is a trading name for the company (i.e. I have MyCo Ltd trading as FaqqerCo and MrsFaqqerCo). All payments are made to the company name, so I don't even need to tell the bank about the trading names.

HTH,

Faqqer

[Troll]

Mrs Mustang is looking at the possibility of setting up a company/franchise to provide swimming instruction. Ultimately she will set this up as a seperate company but in the meantime we were talking about her establishing it as part of MyCo and using MyCo funds to make initial investments.

What is the best way of going about this so that it could become a seperate business?

Would I have to notify Co House that the class of business has changed?

All advice welcome.

I'm very anti this - when the young trolls were learning to swim the local lifeguards used to teach them while I went off to do my lengths..along came a company who provided swimming lessons, lifeguards were issued a letter by the council telling them to stop giving lessons and the fecking swimming company demanded one of the lanes be reserved for their exclusive use !

Plus once the operation was up and running they didn't have enough teachers to cope with demand!

I wasn't sure about councils rights to grant exclusive monopolies for public amenities

[oraclesmith]

Mrs Mustang will have to charge VAT from day one if Mr Mustangs business is registered and she's trading as part of it. For a B2C company this means needlessly high prices for the customer and trading at a disadvantage compared to one-man band coaches. Also if Mrs Mustang has set up costs (eg. publicity) and purchases capital items (training equipment) then she will be able to get all or most of the VAT back if she's eventually has to register for VAT, if she's a separate company, and can set most of these against profits.

You need to see the artificial separation rules which HMRC use, to determine if the businesses are close enough to warrant coming under one VAT umbrella.