Holding Company

[Tiger2015]

Im looking at setting up a holding company and have several company's underneath it. Now I don't still fully understand all this holding stuff but im meeting with an accountant this week to go over everything but just like to get a rough understanding before that

Do I just set the company up as a normal LTD company but just don't trade as such through it ?

or is there anything else I need to do with it ?

Does the holding company still need to file annual returns if it doesn't trade as such ?

If I have my holding company 1 and then company 2 and 3 underneath it are the all linked together ? or could company 2 make a loss / go bust and company 1 and holding still be in good standing ?

Hoping someone can help me understand a bit more

Rory

 

[Scalloway]

Yes it will be a normal limited company and it will need to file annual accounts.

If one company goes bust it should not affect the others.

 

[MikeH]

The first point to raise is do you really need more than one limited company? One company can have several different trading styles and conduct business in many different areas. This can simplify your accounting.http://www.smallfirmsservices.com/info/trading-styles.aspx

We do speak to companies that have a genuine need to form 2 or more limited companies and create a hierarchy. For example, company ABC LTD is the parent company. Beneath that is two separate registered companies XYZ LTD and 123 LTD. Company ABC LTD will normally own 100% of the shares in the subsidiaries XYZ LTD and 123 LTD but it must be at least 51 % or more of the voting shares.

Examples of when this may be done is to separate the business into 'retail' and 'wholesale', or to hold licences, patents, contracts etc under different legal entities.

However, you accountant should explain why you should or should not separate your business. There are accounting obligations and tax considerations including artificial separation of business for VAT and also affects on corporation tax.

All companies have to file accounts, annual returns etc. even if dormant, parent company or subsidiary. http://www.smallfirmsservices.com/news/directors-filing-responsibilities.aspx

 

[Tiger2015]

So I can have company ABC as LTD company - the company XYZ, 123, 555 all under ABC ltd ? Is that when you may see on an email or letter " trading as part of ABC LTD " .

Would this all mean they are linked though ? So should company 123 go bust then the whole lot would go bust ?

 

[TODonnell]

An LTD = A corporation, a 'corpus' or body in law. It can enter into contracts.
T/a = 'Trading as' a trading name or style. This is not a legal 'person'; it can't contract or open a bank account. It's like a 'nom de plume'.

So a businessman who owns BoringName LTD wants to use 'ExcitingName' to help sell his goods. He does this as 'BoringName Ltd t/a ExcitingName'.

'ExcitingName' cannot trade or be listed as 'ExcitingName Ltd'. That would be a lie. People have expectations of Ltds that they don't/can't have of trading styles.

You don't set up an Ltd unless you have a good reason for doing so e.g. fear of being sued, to keep your finances separate from your business or you want to share the business with others i.e. you are a 'company of people'.

So, ExctingName can't go bust because it doesn't exist as an entity. Thus it can't affect 'BoringName Ltd'.

 

[Tiger2015]

ok thanks its cleared it up a bit. So let me get this right.

I currently have company 2.

Could I set up company 1LTD then have company 2 , 3, 4 all trading underneath it.

So each money lets say for easiness , company 2 makes £1000, company 3 makes £1000, company 4 makes £1000. Would all this money really belong to company 1LTD?

If company 2 was to invoice / send receipt , I would just have to put company 1 trading as company 2.

Can I have 2,3,4 company's all trading as company 1 ?

 

[TODonnell]

If you use the word 'Company' then they're separate legal entities. They have to file separate accounts. One company can own the others and the money can be transferred to it, I suppose.

Cut out the confusion:

What you need to discuss with your accountant is: "I want to achieve X result. What's the best way of going about it?"

 

[Tiger2015]

I wouldn't use the word company in the name its just as an example.

Having just spoke to someone just now they have said about the trading as being a good idea like you stated above.

So I would have boringname LTD . But then exciting name , very exciting name trading as boring name LTD.

Seems to make sense,

 

[Scalloway]

If you use the word 'Company' then they're separate legal entities. They have to file separate accounts. One company can own the others and the money can be transferred to it, I suppose.

The word company in this instance has no legal standing. A sole trader or partnership can call their business a company. It is the word limited that matters.

 

[Tiger2015]

Another point ive just thought of. All these other company's which could / will be trading under 123LTD. How do I " register " these company's ? Do I need to trademark the names ?

Will I still be a sole trader trading under the LTD company so I will need fill out y sole trader accounts and then the LTD company accounts?

 

[Scalloway]

If you want to make sure no-one else uses the names you would be better to trademark them.

You may also want to open bank accounts in each T/A business in case you want to receive payments in their names.

You will be a director and employee of 123 Ltd. 123 Ltd will do a tax return covering all the businesses and you will pay tax through PAYE. You will not be self employed.

To get the correct profits for each T/A business you should set up your bookkeeping system to keep separate records for each T/A business in a manner that will allow you to make the proper Companies House and HMRC filings for 123 Ltd. Any accounting software will be able to do this.

 

[Tiger2015]

Right this is all starting to make sense, going to set up LTD company this week,

After reading abit more though, some people suggest having 123LTD then my trading as companies all LTD too but dormant just so no one can take the name. Cheaper than trademarking !

I was wondering about different bank accounts for them due to payments as well, this will be something ill look into at a later date,

Now just a name for my LTD company as after checking what I was going to call it turns out its unavailable ! DOH !!

 

[MikeH]

Without labouring the point. Do not worry about your company name too much. You 'could' head but the keyboard and use the random selection of letters as your company name (a joke but you see my point). Your business can operate under a trading style. For arguments sake. You wanted to form SUPER IT LTD but it was not available. You find SUPER IT LONDON LTD or SUPER SMASHING IT LTD is free to register. You can still use SUPER IT as your trading style, logo etc. You just include the full registered name in small print on websites and legal stationery. Think of British Gas, BT etc. They are trading styles of longer company names.

 

[StevensOnln1]

Having dormant companies gives you no protection other than preventing someone else forming a limited company with the exact same name. It doesn't prevent anyone else trading under that name and you will have to file an annual return and dormant accounts for each dormant company every year.

 

[Tiger2015]

so is trademarking better then as I wont have to submit an annual return for each trading as company ?

If I had " 123bob " trademarked could someone still come along and set up " 123bob LTD " ?

 

[MikeH]

I suggest you look into trademark registration. You cannot just register 123bob. You have to define the 'mark' or brand itself not just the name and select a class to register this in.

On a related matter people cannot simply pass themselves off as your business.

 

[Trademarkroom]

Hi, a trademark registration is very different to setting up an Ltd at Companies House. A registered trademark gives you the monopoly over your chosen name for the goods and services claimed and makes if easier to try and stop those who use that name without your permission. Check out the UKIPO website https://www.gov.uk/government/organisations/intellectual-property-office which is very helpful or drop us a line [email protected]