More Than One Business: How Do I Structure It?
One question I get asked a lot is "I've got an idea for a second business; how do I structure it?". As with most things there is no definitive answer as it will depend on several factors:
If you are already running one business as a sole trader (self employed) then you can have a second business. You would then need to report two lots of self employment on your self assessment tax return and you will pay income tax and class 4 National Insurance on the combined profits.
A key consideration is what level of profits do you think you will achieve, it could potentially be time to look at moving to being a limited company (profits of approximately £25k could mean it is time to move to being limited, but there are other factors to consider too).
There is no need to set up a second limited company - you can do if you want, but there is no need to as you can run more than one trade through a limited company. You can also run as two different trading names, you just need to ensure that your invoices etc make it clear that you are ABC Limited trading as DEF and ABC Limited trading as GHI etc. Running out of one company means you don't need to split costs between different companies or recharge items across between them.
CONSIDERATIONS OF RUNNING MORE THAN ONE BUSINESS
If you are planning on running more than one business, then that is fantastic and lots of people do but there are a couple of points you ought to consider:
Time - there is only one of you, do you have the time to commit to a second business without neglecting your existing business? Plan how it will work as running yourself into the ground isn't actually a viable option!
Financials - it is inevitable that costs will get "muddled" between the two businesses or some will be shared costs, but how will you monitor and track the financial success of the new business. You don't want to be working your butt off to not see returns, or worse still be leaking cash from your current successful business.
OK, these might seem like I am being negative, far from it, playing devil’s advocate is sometimes the role I have to take with clients to make sure they have considered all the options!!
Now go SMASH your second business!!!