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OT - Setting up a Ltd company question
Dangle_kt - 9/1/13 at 11:56 AM

I want to start a small business - if nothing else to prove I can, a bit like those inflatable tracks you see with 50cc quads for the kids to ride at festivals and events...

If I set the company up as Ltd, would I need public liability insurance?

It's only as a bit of a sideline, and I can get the stuff cheap - so as long as I was happy to see the small bit of cash I invest in the company disapear if someone tries to sue me, would this work?

Basically I just want to make sure I'm not personally liable, and as its just starting off I dont want to take on a load of fixed/startup costs that I can possibley avoid.

Obviously if it took off (which I doubt), I would look to protect the ltd company with insurance etc.

Thanks guys

mookaloid - 9/1/13 at 12:12 PM

You will need public liability insurance whether you go Limited Company or not. If you can be proven to be negligent then as company director you can be pursued personally so you can't hide behind Limited company status I'm afraid.

It sounds like you would be better to have the insurance and stick with sole trader status for the time being because there are costs associated with having a Limited company which you don't really need at the moment.

coozer - 9/1/13 at 12:15 PM

"costs associated with having a Limited company"

What costs are those mate?

mookaloid - 9/1/13 at 12:20 PM

quote:
Originally posted by coozer
"costs associated with having a Limited company"

What costs are those mate?


Hi Steve

Well you have to buy or set up a company first. Not hugely expensive - certainly less than £100.

You have to submit accounts to Companies House every year which will probably involve an accountant to prepare these. Probably still only a few hundred but they are costs never the less.

Cheers

M

coozer - 9/1/13 at 12:44 PM

quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
"costs associated with having a Limited company"

What costs are those mate?


Hi Steve

Well you have to buy or set up a company first. Not hugely expensive - certainly less than £100.

You have to submit accounts to Companies House every year which will probably involve an accountant to prepare these. Probably still only a few hundred but they are costs never the less.

Cheers

M


Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...

Dangle_kt - 9/1/13 at 01:14 PM

I'm not planning on making any profit out of the business except hopefully have it be able to afford a van, which I can use for "free".

I just want to try it out rather than jump in with both feet, but I'm screwed if I've got to pay £££'s in a premium I might not even need if no bugger turns up etc.

I've got a decent full time job, but I've always fancied doing something with motorsport - I thought this might be a cheap way in, and prove I can run a small business at the same time.

Ninehigh - 9/1/13 at 01:16 PM

I was under the impression that a limited company has no financial liability beyond the company itself, meaning that if you have assets of £10k and debts of £20k then only the £10k can be taken. I might be wrong but if I am what IS the advantage of a limited company?

matt_gsxr - 9/1/13 at 01:23 PM

"limited liability company" protects directors but has more paperwork.
"sole trader" doesn't protect you but has lighter paperwork.

Look here
http://www.lawdonut.co.uk/law/starting-up/choose-the-right-form-of-business

JonnyS - 9/1/13 at 01:33 PM

quote:
Originally posted by Ninehigh
I was under the impression that a limited company has no financial liability beyond the company itself, meaning that if you have assets of £10k and debts of £20k then only the £10k can be taken. I might be wrong but if I am what IS the advantage of a limited company?


That is correct as long as the owner of the debt cannot prove negligence. It would be very hard to prove in most circumstances. Hence your comment is correct 999 times out of 1000.

However as in the case of the OP, If I was selling motorsport parts, I would get insurance. A faulty part could cost lives and have a massive effect on the limited company and potentially the director. Any person working in motorsport as a sole trader is asking for trouble.

A limited company has lots of advantages but there are some disadvantages too.

JonnyS - 9/1/13 at 01:35 PM

quote:
Originally posted by Dangle_kt
I'm not planning on making any profit out of the business except hopefully have it be able to afford a van, which I can use for "free".



You can't use a van for free in a limited company. It can only be used for business purposes (and commuting under certain conditions) unless you pay a benefit in kind, which will cost you between £600 and £1,400 a year. HMRC are very hot on this and go out of their way to catch people out.

[Edited on 9/1/13 by JonnyS]

mookaloid - 9/1/13 at 01:45 PM

quote:
Originally posted by coozer
quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
"costs associated with having a Limited company"

What costs are those mate?


Hi Steve

Well you have to buy or set up a company first. Not hugely expensive - certainly less than £100.

You have to submit accounts to Companies House every year which will probably involve an accountant to prepare these. Probably still only a few hundred but they are costs never the less.

Cheers

M


Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...


I don't wish to be picky but when expenditure is offset against tax you don't claim it all back.

you do save paying tax on the equivalent amount of income. i.e. you won't get back all the £175 above but the effective cost of that £175 to you is actually £140 because you don't pay tax on that £175

So it is still a cost.

Dangle_kt - 9/1/13 at 01:46 PM

quote:
Originally posted by JonnyS
quote:
Originally posted by Ninehigh
I was under the impression that a limited company has no financial liability beyond the company itself, meaning that if you have assets of £10k and debts of £20k then only the £10k can be taken. I might be wrong but if I am what IS the advantage of a limited company?


That is correct as long as the owner of the debt cannot prove negligence. It would be very hard to prove in most circumstances. Hence your comment is correct 999 times out of 1000.

However as in the case of the OP, If I was selling motorsport parts, I would get insurance. A faulty part could cost lives and have a massive effect on the limited company and potentially the director. Any person working in motorsport as a sole trader is asking for trouble.

A limited company has lots of advantages but there are some disadvantages too.


Thanks - It's not selling the inflatables, its letting little jonny ride them for 10 mins or whatever.

mookaloid - 9/1/13 at 02:05 PM

quote:
Originally posted by Ninehigh
I was under the impression that a limited company has no financial liability beyond the company itself, meaning that if you have assets of £10k and debts of £20k then only the £10k can be taken. I might be wrong but if I am what IS the advantage of a limited company?


The main thing about a Limited Company is that it is formed by the sale of shares. The shareholders invest in the company and their liability is limited to the value of the shares so when the shares are worthless then their liability ends. This enables money to be raised either privately or on the stock market which can be used for business purposes to make a profit and pay back an investment income i.e. dividend to the investors. They would never invest if they could buy £100 worth of shares but lose their house if the company went bust.

As a director you have additional responsibility for running the company within the law of the land so your liability dos not necessarily end with the value of the shares.

Many people also use the Limited Company as a vehicle for (not to put too fine a point on it) paying less tax e.g. footballers are generally not paid directly but are employees of their own Limited Company which means that instead of paying £40% tax on most of their income they can claim for expenses and probably only pay half the tax.

FASTdan - 9/1/13 at 02:09 PM

quote:
Originally posted by coozer

Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...


Thats a cheap accountant isn't it? Is that purely them doing a tax return at the end of the year?

BangedupTiger - 9/1/13 at 02:30 PM

most of the info here is a bit sus.

Go ask a professional.

mookaloid - 9/1/13 at 02:36 PM

quote:
Originally posted by BangedupTiger
most of the info here is a bit sus.

Go ask a professional.


That's a bit of a sweeping statement. Care to expand?

BangedupTiger - 9/1/13 at 02:40 PM

I'm an accountant, my advise is not to listen to advise from people unless they are qualified to give it.

mookaloid - 9/1/13 at 02:44 PM

quote:
Originally posted by BangedupTiger
I'm an accountant, my advise is not to listen to advise from people unless they are qualified to give it.


excellent then perhaps you could give us the benefit of your expert knowledge instead of simply knocking everything that has been said?

BangedupTiger - 9/1/13 at 02:50 PM

quote:
Originally posted by mookaloidexcellent then perhaps you could give us the benefit of your expert knowledge instead of simply knocking everything that has been said?


Based on my expert knowledge gained over the years. I would advise the op to do what I said in my first post. Go ask a professional.

Ninehigh - 9/1/13 at 03:34 PM

quote:
Originally posted by BangedupTiger
quote:
Originally posted by mookaloid
excellent then perhaps you could give us the benefit of your expert knowledge instead of simply knocking everything that has been said?


Based on my expert knowledge gained over the years. I would advise the op to do what I said in my first post. Go ask a professional.


You're a professional!

adithorp - 9/1/13 at 03:49 PM

quote:
Originally posted by Dangle_kt
Thanks - It's not selling the inflatables, its letting little jonny ride them for 10 mins or whatever.


In which case you'll have to have public liability insurance... unless you intend to pay millions in compensation for Little Jonny's spinal injury out of your back pocket.

JonnyS - 9/1/13 at 05:56 PM

quote:
Originally posted by BangedupTiger
quote:
Originally posted by mookaloidexcellent then perhaps you could give us the benefit of your expert knowledge instead of simply knocking everything that has been said?


Based on my expert knowledge gained over the years. I would advise the op to do what I said in my first post. Go ask a professional.


Well for a professional you're not being very professional I'm afraid.

As far as company/tax threads go, this one isn't that bad. I'm an accountant with two decades experience, employ 20 people etc etc. The OP has asked for some specific advice and he's got what he needed. The advice that he needs public liablility insurance.

plentywahalla - 9/1/13 at 06:48 PM

quote:
Originally posted by JonnyS
quote:
Originally posted by BangedupTiger
quote:
Originally posted by mookaloidexcellent then perhaps you could give us the benefit of your expert knowledge instead of simply knocking everything that has been said?


Based on my expert knowledge gained over the years. I would advise the op to do what I said in my first post. Go ask a professional.


Well for a professional you're not being very professional I'm afraid.

As far as company/tax threads go, this one isn't that bad. I'm an accountant with two decades experience, employ 20 people etc etc. The OP has asked for some specific advice and he's got what he needed. The advice that he needs public liablility insurance.


His definition of a professional accountant is one who won't give advice until you cross his palm with silver.

MakeEverything - 9/1/13 at 07:27 PM

quote:
Originally posted by plentywahalla


His definition of a professional accountant is one who won't give advice until you cross his palm with silver.


Who will then say that he is just helping the economy rather than giving things away for free!!

AdrianH - 9/1/13 at 07:28 PM

Lloyd’s used to sell a small book on setting up your own business. That was a bit of an eye opener.

There was a section in there about the differences between Sole traders, Ltd companies and partnerships.

I am sure it said that a single person could not really set up a Ltd company to remove the liabilities, as that person would still be sole owner.

There are also other duties that must be done as part of a Ltd co. Must have a company secretary etc.

I think you would be fine under the sole trader banner with public liability insurance, but I would also suggest you go ask a professional, say your manager or advisor at your bank.

Have a look at small start-up books available and work out a business plan with outlays, time, expected running costs and one thing that many can forget is covenants on your house if you decide to run the business from home!

At one time I tried it running as a small sole trader selling surplus electronic test equipment and radio equipment, did it for 4 years in spare time before realising howe little I made and gave up.


Some times you just have to try.

Adrian

[Edited on 9-1-13 by AdrianH]

cliftyhanger - 9/1/13 at 08:37 PM

Another point is that the events you intend attending will not let you be there UNLESS you have public liability insurance. It is coming to that for autojumbles, let alone a proper business.

JoelP - 9/1/13 at 09:53 PM

quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
"costs associated with having a Limited company"

What costs are those mate?


Hi Steve

Well you have to buy or set up a company first. Not hugely expensive - certainly less than £100.

You have to submit accounts to Companies House every year which will probably involve an accountant to prepare these. Probably still only a few hundred but they are costs never the less.

Cheers

M


Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...


I don't wish to be picky but when expenditure is offset against tax you don't claim it all back.

you do save paying tax on the equivalent amount of income. i.e. you won't get back all the £175 above but the effective cost of that £175 to you is actually £140 because you don't pay tax on that £175

So it is still a cost.



Im glad you've said that, its one of my pet hates when people completely misunderstand how it works. I once had the misfortune of talking to someone who reckoned the tax man had basically bought him a van, ie refunded the £17k. I feel like pulling my hair out just thinking about it!

When i spend £100 on fuel, that 100 gets knocked off my profit and it basically means it has only cost me personally somewhere in the region of £70. That is still £70 i could have got wasted with!

coozer - 9/1/13 at 10:12 PM

quote:
Originally posted by FASTdan
quote:
Originally posted by coozer

Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...


Thats a cheap accountant isn't it? Is that purely them doing a tax return at the end of the year?


I am the director of a limited company. I set this up purely to enable me to freelance between lots of different agencys and not be hammered by the BR tax code. I own 100% of the share which cost a single £1.

I also benefit from a better hourly rate due to the agency not doing my PAYE.

My accountancy fees include weekly PAYE.

Apart from a hour or so book keeping, sending invoices out its better than being employed. I have no assets as I purely provide a service as a driver.

The nature of my business is as a "driving agency"

The agencys I use will not touch sole traders as they remain responsible for the tax, being limited company moves all the risk onto the director.

Now all I need is some work to fill the week!

coozer - 9/1/13 at 10:15 PM

quote:
Originally posted by JoelP
quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
quote:
Originally posted by mookaloid
quote:
Originally posted by coozer
"costs associated with having a Limited company"

What costs are those mate?


Hi Steve

Well you have to buy or set up a company first. Not hugely expensive - certainly less than £100.

You have to submit accounts to Companies House every year which will probably involve an accountant to prepare these. Probably still only a few hundred but they are costs never the less.

Cheers

M


Aye, been there done that, it was £50 to set up and the accountant is £175 a year.. but I claim it all (and more) back off the tax...


I don't wish to be picky but when expenditure is offset against tax you don't claim it all back.

you do save paying tax on the equivalent amount of income. i.e. you won't get back all the £175 above but the effective cost of that £175 to you is actually £140 because you don't pay tax on that £175

So it is still a cost.



Im glad you've said that, its one of my pet hates when people completely misunderstand how it works. I once had the misfortune of talking to someone who reckoned the tax man had basically bought him a van, ie refunded the £17k. I feel like pulling my hair out just thinking about it!

When i spend £100 on fuel, that 100 gets knocked off my profit and it basically means it has only cost me personally somewhere in the region of £70. That is still £70 i could have got wasted with!


Yep, what I meant was I claim it back off the tax liability. I dont get the actual money back it just reduces the amount of corporation tax I pay.

fha772 - 9/1/13 at 10:39 PM

I thought I'd reply to this thread, coming from another angle...

As well as owning a chip shop in Matlock Bath, I'm also a travelling showman (funfairs, we've been in this business since the 17th century that we can trace!!), if you are offering equipment for the public to ride on, from the mini quads your talking about to theme park roller coasters. You MUST have public liability insurance, usually to a minimum £5,000,000 limit.
You will also have to have relevant annual safety inspections on the riding equipment, this must be carried out by an engineer that belongs to a HSE approved inspection body (for inflatables only PIPA http://www.pipa.org.uk/, for all other equipment, including inflatables ADIPS http://www.adips.co.uk/). The inspections can cost upto £300.

If you don't have the annual inspections, your insurance won't be valid and you can be liable for criminal proceedings, if you have and accident(god forbid).
You also have to keep detailed records, this has to include;
1) Daily inspection sheets, that have to be filled out every time you operate, and fault sheets.
2) Maintenance records, which have to be filled in no matter how minor of a job you do.
3) Risk assessment for when setting up, and packing away.
4) Risk assessment for when operating.
5) Detailed set up and pack up procedures.
6) current annual inspection certificate.
7) All previous annual inspection certificates.
8) Operators instructions.

These records have to be kept perminately, believe me, it gets crazy the amount of paperwork you end up with, I've got a 4 drawer filing cabinet full of paperwork, just for 4 small children's rides!!!

I don't mean to scare you, but I thought I'd best tell you what you are letting yourself in for.

Good luck with your venture, and I hope all goes well, Frank.

[Edited on 9/1/13 by fha772]