Changing a business from an Ltd company to sole trader- can you carry on trading?

[DQ24]

Hey so as you might have seen from my other posts, I play in band which I registered as an Ltd company for tax and admin purposes with myself as the sole director/owner but there are 2 other guys who play in the band with me. It's not a full time income, profession or career but does provide a bit of useful extra income which of course has to be declared. However after recently having to file accounts with companies house and HMRC online, plus do confirmation statements, I've realised quite a lot of admin and so I've been thinking of changing the status to solo trader instead.

The other reason from switching to sole trader is that I do other musical income generating activities such as teaching, stand in work, live sound, recording, music transcriptions etc which is all under one sole trader business, so I'm looking to streamline and put the band's income in with this also as it all counts as income from music related activities.

So I wanted to know, if I 'dissolve' the Ltd company, can the band still legally carrying on trading, but under 'sole trader' status rather than Ltd company, or does an Ltd company have to cease all trading if it's dissolved? I think I read something about how an Ltd company must cease trafing for 3 months before being dissolved but I'm not sure. My band has quite a few gigs coming up in the next few months so not sure how that'd work.

As for how the money from the band's gigs and sales of music and merchandise will be split, we will just split it 3 ways most likely. Isn't it easier to do this if I'm a sole trader as I can just send 1/3 of the income to the other 2 band members, without having to set them up as PAYE employees? I wonder if they'd just be classed as contractors and what I pay them would therefore be a deductible expense from my sole trader self-employed activities? They'd then be responsible for their own taxes on any income they receive from the band. Whereas if we carry on as an LTD company presumably I can't just send 1/3 of the income to the other band members as that money belongs to the Ltd company and they'd have to pay income tax on it I presume (as PAYE employees maybe, unless it's still possibly to class them as contracters)?

Thanks.

 

[Scalloway]

There is nothing to stop you trading as a sole trader now. Are the other two agreeable? Have you or the company contracted for the upcoming gigs?

How does the company pay the three of you at the moment? Salary or dividends?

 

[eteb3]

> I can just send 1/3 of the income to the other 2 band members,
> without having to set them up as PAYE employees?“

I would get whatever arrangements written down, and consider legal advice. The case law is littered with bands that were found to be general partnerships (which can arise by operation of law, with no intention to form one).

The lines between you employing the others, them being self-employed contractors working for you, and all three of you “carrying on a business in common” are going to be very blurry indeed.

The only other thing to consider is that a director can’t set up a business competing with, or benefitting from, the business of the company, unless the company (I think meaning its members) gives permission. That’s probably no big deal unless the company ever goes insolvent, but a quick written resolution of the members wouldn’t go amiss