First year - no income and Ltd Co's

[Stitchbob]

First, apologies for the slightly ranty stream of consciousness. I have lots to consider and not quite sure how best to get there.

I have a niche website that's been running as a hobby for a couple of years, paid for out of my own pocket with no advertising or other revenue. I've identified some ways to capitalise on the traffic and make it a 'proper' business, but this will mean developing new features to support the potential revenue streams etc. If I start now, I'm estimating 12 months before I start getting actual revenue.

Since I plan for it to become a business, I want the financial side of it to be separated out from my personal spending, with a view to costs incurred during development being paid back to me when the site is earning. The obvious way to do this a week ago seemed to be to incorporate a limited company so that there's a clear "me loaning money to the business" process going on. Because this was obviously such a great idea, I incorporated a company using one of those "We do everything for a tenner" sites - which, fair play to them, they did.

Then I started reading about the requirements and it all started to get a bit accountant-needingly complicated. I haven't actually used the LC yet, so I can still declare it dormant...and even if I use it, the company is unlikely to ever grow beyond micro-entity size, which sort of looks like it simplifies things a bit.

So now I need to figure out where to go. I realise now I probably acted a little hastily in setting up the company in the first place, but it's done now, so my options are to try and backtrack (declare the company dormant and operate as a sole trader until I start earning), or use the company and make incorporating it the right decision (transfer assets/IP to it and get a head start on branding etc using the registered company)

On the one hand, it looks like registering the company already committed me to a degree of paperwork (self assessment etc), so I might well need an accountant to assist me anyway - and I'd like to be pushing towards a position where I'll be earning revenue by the 12 month mark, so there's a benefit to having someone who understands the business early on. Also, I still want to account for the running costs separately from my own spending, which feels like it needs to be a separate account.

On the other hand, most accountants seem to want about £50 a month for handling a limited company accounts - that's basically what I'm paying out on the rest of my outgoings combined. That seems a lot when theirs no payroll or income yet - they're really just agreeing with me about how much I spent, then doubling it! Even the year end costs seem to be essentially the same price as the total monthly costs so there doesn't even seem to be any benefit in just getting one when the accounts actually fall due.

Is a small limited company with no income really complicated enough to need to pay £50 odd each month for an accountant? Am I better off declaring it dormant until I actually need it, in which case I'd just keep paying running costs out of personal money and write off everything I spend up to the point where I get my first customer.

 

[@aiteoconsulting]

You can have a sole trader business and run it with a separate bank account.

You have a couple of options re the limited company. If you make & keep the company active, but there are very few transactions, you can keep a record of these and try engaging an accountant at the end of the year to do your statutory accounts and corporation tax return. HMRC will almost certainly ask you to do a self-assessment return too.

There is a spirited debate about the cost/benefit of this every time it comes up, but due to the nature of a limited company & the minimum filing requirements you are going to be paying, I would say, a bare minimum of £500 anyway to get this done by an accountant.

You could keep also it dormant, and you could also apply for strike it off and start again when you're ready.

 

[Stitchbob]

Thanks Jonathan, it sounds like either keeping the company dormant or striking it off is the way to go. Since I still plan to use it when I start trading, is there any benefit to keeping it dormant rather than striking off? i.e. is there any advantage to having a company which has been incorporated but dormant for a year or two as opposed to a brand new company?

 

[@aiteoconsulting]

You get to keep the name you've chosen for the company ... if that's important to you.

 

[iDigLocal]

Really the only thing you will need an accountant for are your end of year accounts which you can probably get done for £200+ for a small business with a low turnover. I don't see why you would need to pay a monthly fee.

Annual returns can be done yourself - it takes about 5mins and £13

If you pay by PAYE then HMRC have there own paye software you can download for free

Self assessment could be more tricky, this is going to depend on what you have going on but it is also possible to do this yourself.

Find a local accountant, ignore the bigger companies as they are very expensive.