Running a Ltd company and having a full time job?

[Robbouk]

Hello everyone.

After having a look around this forum, I have decided that I might like to take the plunge and start my own business. Well to be excat, turn my making money on the side scheme into a business.

The field that my business will be based in is very popular, and anyone could probably start a business in it, so I was thinking about registering as a limited company to show customers that I am serious and not just going to be a get-rich-quick scheme.

I have a couple of quick questions that I hope you can shed some light on:-

- I am in full time employment, and wish to continue working. Are there any laws that would stop me from starting a ltd company while remainng at work?

- Do I have to inform my employer by law that I have started a business?

- I don't expect the business to be very profitable in the first few years, can it still be a ltd company?

Many thanks for any answers, tips and advice you are able to provide.

Thanks
Anthony.

[Netcomm UK]

1, Nope. You can have more than one LTD company too.

2, Not at all. It's not really anything to do with them but they may not like it, especially if it was something similar to their business.

3, Yes it can. A LTD company doesn't have to make money, it can lose money, but I believe only for 3 years on the bounce, otherwise in theory you should close it. A LTD company can also be dormant, which means you are basically saving the name like with domains.

[bb99]

- I am in full time employment, and wish to continue working. Are there any laws that would stop me from starting a ltd company while remainng at work?

No. There's no law that would stop you from doing this.

I don't know what your day job is, but your contract of employment with your employer may prohibit you from doing so...

- Do I have to inform my employer by law that I have started a business?

Not by law, no. Again, there might be something in your contract of employment that says you need to seek your employer's permission.

- I don't expect the business to be very profitable in the first few years, can it still be a ltd company?

Yes. I think that, from a taxation point of view, if you're going to be loss making initially then you may be better off as a sole trader at the start. No doubt some of the accountants can elaborate on this. To be fair, I'm an accountant - I'm just not a tax specialist.

Many thanks for any answers, tips and advice you are able to provide.

No worries - welcome to the forum

[Netcomm UK]

Your employer couldn't stop you starting a LTD company. The only thing that can stop that is if you're disqualified.

There have been court cases where employers have tried to stop people leaving to do something similar etc, but the courts have overuled them saying about freedom of movement etc.

[Robbouk]

Hello,

Thanks for the replies. The only thing that seems daunting now is tax and VAT, so I’ll have to do some research on it.

Thanks again!
Anthony.

[James Smith]

On the ltd company front, Netcomm is quite correct to suggest that being a sole trader may be beneficial from a tax point of view if you are loss making. You can easily convert to a limited company a few months or years down the line.

This is because you can offset trading losses against your earned income - ie you get tax back in the same year as you make the losses. For a company the best you can do is carry them forward to a future profitable year which from a cash flow point of view is not such a good thing, and may have a lower cash value as the taxes on employment are higher than that on companies.

For most people opening a small limited company along side a full time job is the way to go unless you need the company from a credibility or other point of view. It is considerably cheaper and easiest method but does have some drawbacks.

There are no rules about having a ltd company that loses money for 3 years, there are however rules about liquidity - basically if you lose money as the owner you have to keep it "liquid" by putting cash into the business if you want to keep it trading.

I hope this helps, regards,

[Netcomm UK]

James,

That was what my bank manager mentioned to me. He said if you ran up losses for more than 3 years on the trot, in theory you are insolvent and should stop trading.

Not that some unscrupilous people do that of course, they just feck other companies up by going bust.... </bitter>

[bb99]

That was what my bank manager mentioned to me. He said if you ran up losses for more than 3 years on the trot, in theory you are insolvent and should stop trading.

Never trust your bank manager!

[Netcomm UK]

I have to trust him and do respect him.

He was the one who took a risk on us starting with a £10000 overdraft and always lets us borrow if we need to.

Top man.