Myself and DH Setting up a business? Advice please

[TooMuchSugar22]

Hello.
I'm hoping for some advice.
NC but longtime MNetter

DH currently works in a job which he could easily do self employed. He loves his job role. But the money isn't great 26k and we're having to have UC top ups.
It's hard because he could get so much more at other places for what he does but his employer is fab in regards to for example if I was ill he could come home to look after kids, school plays, sports days, gets all the holidays he wants and needs etc.
But in many ways they royally take the piss put of him. Over the last year they started asking him to go in half hour early to help then became an hour.. Then stay a bit. Now what was 8.30 to 5pm is now 7.30 to 6pm. No extra wage.

Anyway what he does he could more than do alone and has 90% of the equipment needed. Rest could be added as and when. He also has a fab customer base from helping people out, word of mouth. Large family and friend circle. So the work would be there.

However we would like it as a joint partnership, as i would be doing all the admin, calls etc And other jobs. Which would fit around the dc.

Now we could do in his name and I be an employee. But ideally we'd like it joint for financial security.
Then we won't need UC or anything like that. We won't have the stress each month.

And he's looking at doing it in around 13 to 18m time when the dcs are all in college, ft school and pre school.

My question is can it be in joint names. We would like as a limited Company. Where we'd both draw a wage each month. Which would be slightly over what he earns and what we'd get in UC to build a profit in the business to be able to expand in the future. And then once a year draw a larger dividend sum as we'd like to eventually save for a mortgage. Then we'd have proof of where the money come from etc.

Is this how it would work or am I way off.

I'm just trying to get an idea for now of roughly how it works. As putting pen to paper of all the things we'd require. Insurances and so forth.

Obviously when the time comes we'd get an accountant as I belive accounts get done quarterly and annually? I hope I got that right.

We would also like to employ the teen) +) (along side college) as a weekend job as there's a small role he could do for maybe 5/10 hours a week that would be a great help and good experience for him.

Our dream is to have a lovely little family business but not sure how it would work in respect of who can own the business. Whether better just being dh and me employed. Me own and him employed altho he'd do the lions share of the work or joint (I'm More sensible when it comes to spending in general which is why he'd like it either in mh name or joint so I'd have more control of makes sense as I'm more dave he's more spend but not in a way we'd get in debt I have no worry there)

Fwiw the UC top ups is because we were forced to move and rent was higher and childcare for me to return to my old role or similar would actually cost more than I'd earn out of the household pot.

This new venture would mean I can work around school and pre school hours and evenings between us if needed.

No idea

Bump

I am sure others can help but I would start with the following government links:
www.gov.uk/set-up-business
www.gov.uk/topic/company-registration-filing/starting-company
www.gov.uk/government/collections/new-enterprise-allowance-campaign

Also search your local authority/county council website for adult education courses on setting up a business.

The OU also has courses help.open.ac.uk/how-to-start-a-business

I went freelance and set up a ltd company with myself and DH as directors. We did it ourselves - easy to buy an ‘off the shelf’ company for about £100 or so. Our shareholding was 50/50 as was dividend payouts.

Most important thing to do imo is to make sure you get a very good accountant for tax returns (though DH did all the admin including VAT returns - a must if turnover likely to be over £85k).

Best move I ever made - good luck!

Thank you. Will look at links.

We have a great accountant. Who did previous accounts when dh had a sideline business more of a hobby / fun. But the hours were too unsocial once we had the dcs. So we're lucky in that respect.

If you have a good accountant already, talk to them first.

At our practice, we would give you advice on setting up foc/included in annual fee as it will save us time and money in the long term if our client starts off from a good place.

Good luck !!

Speak to your Accountant
They may be able to put you in touch with people who can offer free business advice, some offer it themselves.
You sound like you have a start of a solid plan but I mentor small businesses and quite a few that fail are where someone has a skill which they use for someone else and then try to go it alone. Running a business is difficult and can be a lot of hard work. Being a really good plumber for example doesn’t mean you can run a plumbing business.
Having said that if you can run the business while he does the practical part you stand a much better chance of success.
Good luck

I don't think a ltd is best for you if you have no assets (mentioned wanting a mortgage in the future).

What about a partnership? No red tape, no companies House, complete privacy.

I would do some reading up on business start ups/book keeping, etc long before you start.

Have you actually written out a business plan?

Some councils have good business advice teams. I'd arrange to meet with them and discuss all your options.

I'll third speaking to your accountant.

Definitely talk to your accountant.

As @Hoppinggreen points out, it's really important to distinguish between doing the job and running the business. They are very different and require different skill sets. You need to plan very carefully - so spending time on your business, not in your business.

Have you done a business plan? That's crucial, along with a cashflow plan - so you know where and how your revenue is going to come from. Setting targets for revenue is important - but even more so is your profitability. Have you worked out a pricing structure for your products/services?

Good luck!

Agree you should speak to your accountant.

But also be careful with any assumptions you're making about his potential client base. He should check his current employment contract for a non-solicitation clause. Employers don't tend to take kindly to ex-employees walking off with their customers and so they build in clauses to stop them doing that. So you may need to build a ramping up period into your business plan while you build up a new client base.

Go into it with your eyes wide open and very best of luck - sounds like it could be very exciting!

If you want a mortgage, stay salaries for now. Mortgage companies will want 3 years evidence so if you start the company in 12-18 months time it will be at least 4 years before you can apply for a mortgage.

I agree with others. You need to speak to an accountant first, and take their advice. It might be more beneficial (tax-wise, for instance) to run the business as a partnership, as a sole trader with you as an employee, or a Ltd company with you both as directors, or one of you as a director and the other just holds shares. Your accountant will look at all your finances and decide which would be most suitable and tax-efficient in your case.

I agree with @WildRunner
Don’t make assumptions about the existing client base. A lot of people might say they will use his services if he sets up on his own but most wont. Have a plan in place for finding New customers rather than relying on these people.

You need a good accountant. They will probably tell you to pay yourselves minimum wage and draw the rest as a dividend at a lower tax rate. Also remember you will have a tax free allowance for both of you. So you will actually have the same income by earning less.

Definitely get an accountant to show you the sums between being a partnership and a limited company. You could set up a company yourself on Companies House website for £12. Good luck

Thank you.
Client base isn't ones from his day job he wouldn't do that to them.
He helps a lot of people out and from that has build good bonds.

If it went tits up. He would return to an employment job because what he does there's a huge shortage here people are crying out.

But yes we have an accountant. Going to look at sums in the summer etc and go from here. We'd like to do it appox April 2023. So we have lots of time to plan, get advice. Make note and so forth.

I think your vision of how easy it will be to run a business is a little naive. Your husband's employer actually protects him and you from a lot of stressful stuff you don't see. You could look at other solutions, for example him stopping going in early, negotiating a pay rise, finding a better job in the same sector, etc. Otherwise what you propose is fine. You can both be directors of a Ltd co and it's better for tax purposes if you both draw a salary. The one suggestion I'd make is to split the business 51/49 in favour of one of you, so if you disagree about a decision the business will not be paralysed.

The crux of this is whether the nature of the work and contract is in or outside IR35. HMRC are increasingly aggressive at enforcing it, often incorrectly.

If he has a multiple client base then it is probably unlikely he would be caught by it but there are online tools to check. Your accountant could advise as well.

Being limited is a must really for what you describe as long as he isn't caught by IR35

Is your DH part of the construction industry? You need to read up on CIS and also Reverse Charge VAT if so.

While I agree that IR35 needs to be considered from what OP has said it sounds very unlikely it would be applicable here.
I appreciate that you say the client base he believes he has is not due to his existing job, and that’s good but my advice still applies - you simply can’t assume that people will give you work even if they have said they will. You need to make sure you have a solid plan for getting work in from completely new areas. Believe me, I have seen people start up based on promises of work from many sources and it rarely materialises. You must have a marketing plan of some kind to bring in business

Yep:

• business plan, outlining the scope and aims of the business (including projected/targeted revenue and profit) for the next year, 3 years and 5 years - so short and long term business planning

• cashflow plan, detailing where/when/how much money is coming in and where any loans or investment might be required

• marketing plan, outlining how the business plan is going to be achieved: who is your target customer? What are they going to want to buy (and why)? How are you going to communicate with them? How much money do you need to invest in marketing? Who is your competition, and how are you going to differentiate your products/services/offers from them?

@felulageller

I don't think a ltd is best for you if you have no assets (mentioned wanting a mortgage in the future).

What about a partnership? No red tape, no companies House, complete privacy.

I would do some reading up on business start ups/book keeping, etc long before you start.

Have you actually written out a business plan?

Some councils have good business advice teams. I'd arrange to meet with them and discuss all your options.

When DH and I ran a business together we ran it as a partnership - there was no formal agreement because as a married couple we are automatically a partnership (this came from lawyer).

And yes to local authority advice/assistance. Our LA was absolutely brilliant.

Hello,

I am in a similar situation - DH and I own/run a Limited company. We are both Directors and everything is 50/50. We have had some fantastic advice from our accountant but found our Local Authority etc to be utterly useless! We pay ourselves in a similar way to what you intend - £1000 each a month PAYE at the basic tax rate - this means we pay all our tax/NI monthly so we don't get a big bill at the end of the year. We then pay ourselves a dividend annually taking us up to the tax threshold. This works well for us, but means that you might need some savings/funds to see you through the first year until the dividend is paid.

Managing cashflow has been one of the biggest lessons. I have a mega-spreadsheet with every invoice/bill/overhead/possible transaction in which is really useful for helping us to plan and we've never had any surprises when it's come to paying big bill. A lot of small/new business fail due to not having enough cash when they need it rather than not having enough business - be tough about making customers pay on time.

The hardest thing for me is trying to balance the needs of the business with the needs of our family - but we're learning all the time!

@TooMuchSugar22
You do need to be aware of the differences of being self employed and being a director of your own company.

As you might have heard, lots of self employed people who were company directors didn’t get anything from the government during the covid crisis. This is because they only took dividends and not a salary. Therefore they paid a lower rate of tax and not income tax. Be very careful about how you set this up and what your position could be regarding government help. My DH paid himself a living wage which was taxed as income tax and dividends when appropriate. These attract corporation tax at a much lower rate.

Therefore speak to an accountant but it might be worth being partners in the first instance. It is 3 years of accounts for a mortgage though.