Team of contractors 1 ltd company

[jgy6000]

Hi All,

Just a quick question, can a group of contractors work under the same LTD company and is there any advantage/ disadvantage of doing so?

I will be contracting soon and a friend in the same field has asked me to join his LTD company.

From my point of view its all set up so I don't really need to do anything, just wanted to know if this is common or there any any drawbacks to it?

Thanks

[MarillionFan]

Hi All,

Just a quick question, can a group of contractors work under the same LTD company and is there any advantage/ disadvantage of doing so?

I will be contracting soon and a friend in the same field has asked me to join his LTD company.

From my point of view its all set up so I don't really need to do anything, just wanted to know if this is common or there any any drawbacks to it?

Thanks

It's called a consultancy, and as long as you have equal shares (and or pay salaries/divvies) then no there is no real issue with it.

[northernladuk]

The disadvantage is that you are involving your friend in your business, which, bearing in mind how basic this question is, will definitely go wrong.

If you get different rates or one is on bench and other isn't, one wants to pay more than the other, one wants to take more expenses out, has a different attitude to risk, cleans the bank out and spends it on hookers and coke, then you are going to fall out.

It costs so very little to set your own LTD up, am talking sub £100 if you do it yourself so there is no real cost saving. You might save some accountant which is a whole £1500 year. There is no justification to go in together to save costs.

I can't think of any benefits to join your friend. Just do it yourself properly IMO. I don't know a single person that is in business with his friend/family but I have read a lot of fall outs from this situation on here.

[jgy6000]

Thanks for the feedback guys, will take it into account.

[jmo21]

The disadvantage is that you are involving your friend in your business, which, bearing in mind how basic this question is, will definitely go wrong.

If you get different rates or one is on bench and other isn't, one wants to pay more than the other, one wants to take more expenses out, has a different attitude to risk, cleans the bank out and spends it on hookers and coke, then you are going to fall out.

It costs so very little to set your own LTD up, am talking sub £100 if you do it yourself so there is no real cost saving. You might save some accountant which is a whole £1500 year. There is no justification to go in together to save costs.

I can't think of any benefits to join your friend. Just do it yourself properly IMO. I don't know a single person that is in business with his friend/family but I have read a lot of fall outs from this situation on here.

Would it help towards an IR35 defence?

That is possibly the only thing I can think of that might make it worth it.

Other than that, WNLUKS.

[Andrew at Boox]

The disadvantage is that you are involving your friend in your business, which, bearing in mind how basic this question is, will definitely go wrong.

If you get different rates or one is on bench and other isn't, one wants to pay more than the other, one wants to take more expenses out, has a different attitude to risk, cleans the bank out and spends it on hookers and coke, then you are going to fall out.

It costs so very little to set your own LTD up, am talking sub £100 if you do it yourself so there is no real cost saving. You might save some accountant which is a whole £1500 year. There is no justification to go in together to save costs.

I can't think of any benefits to join your friend. Just do it yourself properly IMO. I don't know a single person that is in business with his friend/family but I have read a lot of fall outs from this situation on here.

I couldn't agree more. The costs of going on your own are minimal compared to the headaches you'll be lining yourself up for. Your biggest hurdle to your own set up is likely to be opening a business bank account and as long as your credit history is OK that should be relatively easy!

[Greg@CapitalCity]

If you are both independent contractors, then the only advantages I can think of are;
(1) No hassle set-up - the business is already up and running;
(2) Perhaps some accounting fee savings;

As others have mentioned here, the disadvantages will usually out-weigh the advantages by a large margin;
(1) Different pay rates will mean you both should be paid different dividend amounts - this calculation can be onerous;
(2) If you both claim different levels of expenses, this adds to the complexity of (1) above, as does benchtime NLUK has mentioned;
(3) Earnings for a mortgage - if you're looking to get a mortgage as some point down the road, sharing a ltd company may cause problems for the bank in determining your earnings level;
(4) What happens if you fall out with your business partner? You'll need a rock solid shareholder agreement in place, drawn up by a specialist;
(5) The increased turnover may push the company out of the flat rate VAT scheme;
(6) Once the company is wound up after trading has ceased, you may face significant complications in trying to extract your retained earnings as a capital gain in a fair way;
(7) In the event your combined turnover exceeds £300k per year, you start to pay more company tax than you would with two separate companies;
(8) How do you feel about carrying the business and commercial risks for not only yourself, but also your business partner? If your partner was found to be caught by IR35 for example, the HMRC would come to collect money from the company you both share;

Anyway, hopefully that is some food for thought.

[Support Monkey]

never ever ever go into business with friends, or indeed any partner, it almost always ends in tears