I think I screwed up in a really big way

Discussion in 'Accounts & Finance' started by Kerwin, Sep 16, 2020.

  1. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    In August, I started a private limited company called Company1, and its business intent was to rent virtual private servers to the general public and businesses. Nothing really special about the business idea. There are hundreds if not thousands of companies out there doing the same thing.

    Anyway, as I was working on the programming for the website, I started to work on the payment side of things because I wanted to be able to accept at least some cryptocurrencies for payment. But the more I thought about, the more I realised that it was a risky venture so I had the bright (or rather stupid) idea to form Company2 to handle the payment side of things so that Company1 could concentrate on renting virtual private servers. The problem is I made Company1 a 100% shareholder in Company,2 and now no bank will open a business current account for Company2 because the person with significant control is a corporation and not a person.

    Does anyone know how I can get out of this situation? I'm not looking for personal gain at the moment I just want a business current account with a debit card. I don't want any loans, overdrafts or credit cards. Just a standard account with a debit card.

    Can anyone help at all, please? I'm prepared to pay for help from someone if that is required.
     
    Posted: Sep 16, 2020 By: Kerwin Member since: Dec 1, 2018
    #1
  2. billybob99

    billybob99 UKBF Regular Free Member

    1,737 556
    Sounds like a proper ballache you got started.

    You don't need Company2 - that was the mistake there.

    Nobody is gonna be paying in crypto anytime soon. Your core service is to rent virtual private servers, that's it.
     
    Posted: Sep 16, 2020 By: billybob99 Member since: Apr 23, 2013
    #2
  3. mattk

    mattk UKBF Newcomer Free Member

    2,301 848
    Literally, what I was thinking, word for word.

    Forget company 2. Open an account in the name of company 1 and take all the payments through that. There are crypto payment gateways that you simply embed in your site the same way you do card payment gateways or PayPal etc. if your really want to go down that route.
     
    Posted: Sep 16, 2020 By: mattk Member since: Dec 5, 2005
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    16,403 3,470
    If Company 2 has no assets or liabilities just have it dissolved. It will only cost a few pounds.
     
    Posted: Sep 16, 2020 By: Scalloway Member since: Jun 6, 2010
    #4
  5. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    I had bigger plans for Company2. I thought that since I was building the crypto side of things anyway I could expand in the future to let other people accept crypto payments through the website. It was meant to be a staged process with me starting off just using it for my own website but eventually expanding to other websites.
     
    Posted: Sep 16, 2020 By: Kerwin Member since: Dec 1, 2018
    #5
  6. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    That might be what I have to do but I think it would be a shame.

    Thank you all for your advice so far though. I really appreciate it all.
     
    Posted: Sep 16, 2020 By: Kerwin Member since: Dec 1, 2018
    #6
  7. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Otherwise, can you buy some shares from company1, so that you personally have a shareholding in company2, hopefully making company2 eligible for banking?
     
    Posted: Sep 17, 2020 at 8:38 AM By: neilsolaris Member since: Apr 30, 2018
    #7
  8. STDFR33

    STDFR33 UKBF Big Shot Free Member

    4,487 1,189
    Unfortunately this is what happens when any Joe Bloggs can open a company for peanuts.
     
    Posted: Sep 17, 2020 at 8:49 AM By: STDFR33 Member since: Aug 7, 2016
    #8
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  9. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,571 463
    Can't you just add yourself/some individuals as shareholders of Company two and change the control?
     
    Posted: Sep 17, 2020 at 9:16 AM By: Lisa Thomas Member since: Apr 20, 2015
    #9
  10. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    Well, I had some advice that suggested it was a good idea to keep different businesses separate. But I wanted the dividends to go to the first company so that it could use them to fund hardware purchases. If I had known corporate shareholders was such a big deal to banks I would have just made myself the only shareholder and there wouldn't have been any problems.
     
    Posted: Sep 17, 2020 at 9:39 AM By: Kerwin Member since: Dec 1, 2018
    #10
  11. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    Yeah. I have two options. I can do this and sell the one share that Company1 owns to myself so that I become a 100% shareholder in both companies or I can dissolve Company2 and carry on the business as Company1 trading as NewBusinessName. I'd really rather keep them as distinct companies because they both do different things so I'm not sure at the moment what to do.

    Looking for advice really. As I said in my first post I'm willing to pay for it.
     
    Posted: Sep 17, 2020 at 9:41 AM By: Kerwin Member since: Dec 1, 2018
    #11
  12. Paul Norman

    Paul Norman UKBF Ace Free Member

    2,780 866
    Close Company 2. It brings zero benefit. And as I suspect Company 2 is, in reality, still you, it doesn't help with the focus thing.

    All it brings is cost.
     
    Posted: Sep 17, 2020 at 10:09 AM By: Paul Norman Member since: Apr 8, 2010
    #12
  13. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    Not entirely true. First of all, it is a completely separate business idea with different target markets and customers and secondly, if it fails then having it as a second company means that the original company doesn't go bust. The only reason I made Company1 a 100% shareholder of Company2 was that I wanted potential dividends to help Company1 to pay for server hardware to help it with its business. Changing the shareholders of Company2 so that I am a 100% shareholder instead would probably fix the issue and I could give any dividends I get from Company2 to Company1 as a directors loan. It just isn't as clear cut and feels like a bit of a hack doing it that way.

    I had no idea banks had such a big problem with corporate shareholders otherwise I would have made myself the shareholder right from the start. I still think that having Company2 is the better solution I'm just wondering what the fix is? I can submit a change in shareholder to Companies House and once that updates hopefully I'll be able to get a business account and all will be well.
     
    Posted: Sep 17, 2020 at 10:59 AM By: Kerwin Member since: Dec 1, 2018
    #13
  14. simon field

    simon field UKBF Big Shot Full Member - Verified Business

    4,763 1,748
    Why not just ask the bank what they require of you?
     
    Posted: Sep 17, 2020 at 11:00 AM By: simon field Member since: Feb 4, 2011
    #14
  15. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    The requirements say the company must be 100% owned by individuals and not companies. So I guess I just change the shareholder to myself and all will be well.
     
    Posted: Sep 17, 2020 at 11:12 AM By: Kerwin Member since: Dec 1, 2018
    #15
  16. Kerwin

    Kerwin UKBF Regular Free Member

    117 11
    Not sure how that is a helpful answer or contribution. There is absolutely nothing wrong with having another company being a shareholder of a limited company. How was I supposed to know that all the banks didn't like it? I didn't do anything wrong or break any laws.
     
    Posted: Sep 17, 2020 at 12:59 PM By: Kerwin Member since: Dec 1, 2018
    #16
  17. consultant

    consultant Your Business Community Staff Member

    5,664 797
    What were the qualifications of the person who gave this advice?
     
    Posted: Sep 17, 2020 at 1:05 PM By: consultant Member since: Jan 21, 2008
    #17
  18. Scalloway

    Scalloway UKBF Legend Free Member

    16,403 3,470
    It must be a unique requirement of your bank otherwise how would companies be able to set up wholly owned subsidiaries. A few years ago I opened a bank account for a company wholly owned by an incorporated charity no problem.
     
    Posted: Sep 17, 2020 at 1:41 PM By: Scalloway Member since: Jun 6, 2010
    #18
  19. STDFR33

    STDFR33 UKBF Big Shot Free Member

    4,487 1,189
    Nothing wrong with it, just stupid.

    It was needless for what you wanted to achieve and has created problems.
     
    Posted: Sep 17, 2020 at 1:44 PM By: STDFR33 Member since: Aug 7, 2016
    #19
  20. The Byre

    The Byre UKBF Legend Full Member

    10,236 4,231
    There is something wrong and you were supposed to know - and yes, you did break a law.

    You broke the number one rule for starting a business - do one thing properly!

    If a bank suspects that accounts are being opened frivolously or with dishonest intent, they dig their heels in. It's 'Business-101' and is something you are supposed to know, along with a thousand other things. Frivolous opening of accounts leads to dead accounts cluttering the books and causing costs they may not be able to recover, especially if the account is a Ltd. that has no assets and may be dissolved.

    Also - a second company means you have to pay for a second set of books. Do yourself a favour and close it!
     
    Posted: Sep 17, 2020 at 1:57 PM By: The Byre Member since: Aug 13, 2013
    #20