Starting up

[Foggy]

Has anyone any experience of setting up in business with some collegues - consultancy type work (non-diving)?

I would like to know what is required and how to go about it.

Is a partnership better than a Ltd company?
How does one go about setting up either?

What insurances are required?

Cheers, Paul

[uwila]

A partnership means the partners are personally liable for all debts if the venture fails. Ltd company is a seperate legal identity and the debt is limited.

To start a partnership, you are advised to have a legelly binding Parntership Agreement, but it isn't a requirement. Ltd companies are best started by buying an off-the shelf one, but it isn't hard to do it yourself. Writing out the 'aims' is the most tedious bit. The Ltd company can't do anything unless it was mentioned in the aims. For example, my company can do hairdressing, but as we are all IT people it's unlikely!

You'll probably need to be VAT registered as well, doesn't matter which way you organise things.

The minimum insureance required by law is Employers Liability. It works out at about £300 per person for us. This is compulsorary even for an ltd company with one active person.

You'll also need an accountant to produce the accounts at the end of the year. The legal obligations are the same either way, unless you start making huge profits

Partnership = less hassle, more personal risk
Ltd company = more protection, more hassle

I wouldn't have considered a partnership for IT consultancy as most of our customers won't deal with small partnerships.

Cheers, Chris

[Gav]

Hi Paul

I would recommend you speak to a professional, such as an Accountant, who will be able to advise you on the right course for you. As Uwila says, there are differences between Ltd Co and Partnerships, the reason that both exist is that one is better for some situations than the other. You will also need to consider what happens if you wish to dissolve the relationship at some point in the future, whether it be amicable or not. Business can be like a marriage, all rose tinted on the way in and extremely bitter on the way out!

HTH

[Foggy]

Thanks for the info and advice. I shall be talking to the professionals before embarking on this venture if it a flyer, but I need to get a feel for whether it is going to be excessive hassle / fail at first hurdle.

Also what is a limited liability partnership? I thought it was a partnership but with the limited liability aspects of a Ltd company?

Thanks for the heads up about splitting up - well aware of the fact that things will need to be nailed down before starting; termination, sickness, shareing profit / loss, expanding business, etc etc etc etc. Would this be solicitor fodder or as suggested accountant?

How does one become a company - from scratch / taking over an existing defunct one (yes I am aware of accepting liabilities etc).

Cheers, Paul

[uwila]

Generally, you would take over a dormant company - one which has been legally constituted but has never traded so there can be no debt to worry about, or use a formations business and they can register an ltd company in about a day.

Google 'company formations' and look at a few of the sites that specialise in this area.

[Sinbad Returns]

An LLP shares some of the attributes of a company and a partneship. You are a member/partner, rather than an employee or director, which can (depending on what you are doing and for who) give rise to NIC benefits (as with a LP), but you have to file company-style accounts with companies house (as with a company). Your capital is, I believe, limited to the amount of your contribution. A partnership is good for splitting profits any way you see fit.

People's choices often come down to whether they care about filing accounts in the public domain (in which case a company or LLP are out) vs. liability issues and flexibility.

As you have concluded, you need to sit down with someone and go through precisely what you intend to do in excrutiating detail in order to get to your favoured mix of liability protection / disclosure / tax efficiency and god knows how many other things.

[paramedic paul]

Just my 2p worth!!!

Are you collegues or friends?? If you are friends be very careful. I have started two businesses with friends in the past, both went bust for very different reasons. Neither friendship survived. It hurt a bit at the time (one still does as we were great mates!)

Sorry to be so pessermistic but forewarned is forearmed!

[Ding Dang Doo]

As a consultancy you might not need to have credit accounts with suppliers, but if you do, a limited company may be better, unless you have a big wedge of cash available to use.

As a sole trader (similar in may ways to a partnership), I have banged my head against the wall trying to convince other companies to give me any form of credit at all!

After 8 months, I'm just starting get credit with some of my suppliers.

Best of Luck

Pete

[Foggy]

Thanks for all the info.

The people concerned are collegues first and friends second. We currently work as a consultancy (ltd) - and there are 4 of us, or 5 if you include the Lab. We are wholly owned by a partnership (LLP), and funily enough no matter how hard we work our MASSSIVE overhead eats up our profit. The result is a big old caning every year. I appreciate that going into business by ourselves may be the fastest way to end any friendship, but we are considering it.

Apart from the Lab, our only requirements are paper, ink, reference books and probably computers, telephones etc. In fact we could all easily work from home instead of two sets of offices as now , and only meet up once a month. So getting credit shouldn't be a problem (ok prehaps for the lab it may be), and overheads should plummet (and profits soar skywards - well I can dream can't I).

Any further advice?

Cheers, Paul