Best business structure for internal trading software company?

[LeeT]

Hi folks,

I’m looking for some advice before I take a business idea any further, mainly because I want to make sure I understand the legal and practical side of it properly first.

I’ve built some internal trading software within my company and I currently use it myself. I also have a website where I show the tracked performance and explain what the business is doing, but I’m not selling the software, selling signals, or asking anyone to invest. At this stage I’m just trying to work out what the correct business route would be if I decided to develop it further.

In an ideal world, I’d like to understand what the cleanest structure would be. For example, whether this is something that should just remain a software/consultancy business, or whether there is a lawful and sensible way to grow it within a company and potentially raise money through shares later on.

I’m not asking how to market an investment or anything like that. I’m more trying to understand where the line is, legally and practically, between running a company that uses its own trading technology internally and doing something that starts to fall into regulated territory.

So I suppose my questions are:

• what type of business structure sounds most appropriate for something like this?
• if I ever wanted to raise money in the future, is a normal private company share structure the obvious route?
• at what point do things start becoming legally awkward if the company is trading internally and building treasury value?
• would I be better speaking to an accountant first, a solicitor, or both?

I’m just trying to get my head around what is realistic, what is allowed, and what the sensible route would be before I spend more time building around the wrong structure.

Thanks for reading, and any advice is appreciated.

 

[Ozzy]

• would I be better speaking to an accountant first, a solicitor, or both?

If you have clear aspirations of growth and profit, then yes this is good.
At the moment, based on what you have written, it seems you're not quite sure yet so doing what will effectively be a restructure would be costly and potentially unnecessary. Decide on your business plan, where you want to go, then go out and get the tax and legal advice you need.

 

[Mark T Jones]

This is probably a good time to consider ownership of IP (in your own name gives most flexibility). Beyond that, as @Ozzy has suggested its best to actually get things rolling and a clear plan before you dive into structures

 

[Gecko001]

It seems to me that the best way is to start a completely separate company for the software and then invoice your company for the software at the same price that you are selling it to others.

What you propose to do, is not uncommon. e.g. Arup (engineers and architects) started to sell their own in-house software to others years, if not decades, ago with Oasys.

 

[jack52]

between running a company that uses its own trading technology internally and doing something that starts to fall into regulated territory.

The UK regulatory perimeter is extremely confusing and can be very unclear.

You will need proper legal advice from someone who really understands what you are doing. Unfortuately innovation in UK financial services is very expensive from a legal / compliance point of view.

What exactly does the software do?

 

[fisicx]

Start simple. Set up a website as a sole trader to market the software. Compliance may not even be necessary. I sell financial plugins across the world - it's up to the client to ensure they comply with local laws not me.

If you get traction and it starts to earn a few bob you can then decide if you want to incorporate.

 

[jack52]

Start simple. Set up a website as a sole trader to market the software. Compliance may not even be necessary. I sell financial plugins across the world - it's up to the client to ensure they comply with local laws not me.

If you get traction and it starts to earn a few bob you can then decide if you want to incorporate.

I think anything related to 'trading software' you 100% would want legal advice from a top financial services law firm.

 

[fisicx]

I think anything related to 'trading software' you 100% would want legal advice from a top financial services law firm.

Without knowing a lot more about the purpose of the software it’s not possible to say if advice is needed. It could simply be a monitoring tool. If it does manage transactions with money changing hands then it will need FCA compliance.

I’d still begin as a sole trader. No point in setting up a company for a product that may not be viable.

 

[Data Swami]

depending on what trading its doing I would also get in touch with any technical/compliance experts in that area. FCA rules are very strict and there is a significant amount of regulation around these sorts of things especially where customer money is used including requiring stores of cash on hand for any money invested from clients etc. And thats only touching to surface of the regs

 

[jack52]

Without knowing a lot more about the purpose of the software it’s not possible to say if advice is needed. It could simply be a monitoring tool. If it does manage transactions with money changing hands then it will need FCA compliance.

I’d still begin as a sole trader. No point in setting up a company for a product that may not be viable.

Even creating a 'monitoring tool' might be a regulated activity. It likely depends on what exactly it does and so expert advice would be needed.

 

[fisicx]

That may be so, but you still don’t need to set up a company on day. Seek the advice, talk to people and then decide the course of action.

It may be so complicated and expensive to get compliant that a better solution may be to white label the product.

The last three trading plugins I built for clients didn’t need me to get any sort of compliance. The client did all that, I’m just the developer.

 

[jack52]

What does the software actually do?