Limited company - having 2 directors - Suggestions needed

[Bumble79]

Hi,

I am new to contracting and doing my home work on how to set up a limited company. My husband is also contracting and we were thinking of setting up one limited company with both of us as directors.

I spoke to a couple of new client advisers and they advice that it's more beneficial if we set up our individual companies because our income would be more than 150,000 pounds per year. Whereas when I speak to one of a friends accountant, he does not see any reason why we should be part of different limited company.

Any ideas/thoughts/suggestions would be welcome. Please do let me know as I am really confused about this.

Thank you.

[Craig@Clarity]

The £150,000 turnover advice you've been given could be to do with registering for flat rate VAT. If you're both working under the same company and your estimated turnover is over £150,000 in the next year, you can't register for this. If you had separate companies you could.

If you don't have that much turnover between the both of you, I can't see a reason why you can have one company. As an aside, you may have to factor insurance that would cover you both for each of your contracts perhaps if you're under the same limited company.

[Sockpuppet]

Bear in mind that if you can engineer yourself to come in below the £150k barrier once your in the scheme you can go upto £230k and stay in it. So if you're not anticipating breaking £150k in the next 12 months go for it.

[Bugbait]

Further to what Craig said, if your initial turnover is sub £150k you can register for flat rate VAT and remain on it up to £225k (last I checked) I believe. My wife and I went through a similar decision and decided to loose the flat rate VAT advantage for potential longer term gains. Since my wife contributed to over half the turnover before taking extended maternity break, we were advised that it would be “reasonable” for her to continue being paid her share while on maternity leave, even though she wasn’t actively earning for the company.

Although I believe the case for 2 directors, 1 primary earner but both being paid equally has been successfully defended in court? Although someone more in the know should be able to comment?

[Fred Bloggs]

Although I believe the case for 2 directors, 1 primary earner but both being paid equally has been successfully defended in court? Although someone more in the know should be able to comment?

I think you're referring to the Arctic Systems Ltd case. Plenty of info here and elsewhere on that.

[DaveB]

I think you're referring to the Arctic Systems Ltd case. Plenty of info here and elsewhere on that.

I believe Arctic Systems was more to do with income splitting through share dsitribution than having two directors.

[Fred Bloggs]

I believe Arctic Systems was more to do with income splitting through share dsitribution than having two directors.

You need to be share holder to get the divis but not necessarily be a director (Mrs Bloggs is a shareholder but is not a director) that's why I suggested the case of interest here was most likely Arctic Systems Ltd.

[DaveB]

You need to be share holder to get the divis but not necessarily be a director (Mrs Bloggs is a shareholder but is not a director) that's why I suggested the case of interest here was most likely Arctic Systems Ltd.

Yes, but Bugbait was specifically referring to a split based on there being two directors, which as you point out is not required.

[Fred Bloggs]

Yes, but Bugbait was specifically referring to a split based on there being two directors, which as you point out is not required.

Correct, that's why I kind of reinterpreted it as really meaning two shareholders!

[Bugbait]

Fred was on the money, I just have bad memory .