self employed with 2 businesses...

[blissed]

Hi there, I am going to become self employed in April and am starting two different businesses. I am wondering what I will need to do regarding books? They are both small, sole trader enterprises. Would I need to keep separate books for each business and also one for myself? This is what I have been told, but I'm not sure what is the case.

Many thanks in advance

Donna.

 

[da8iwr]

If you're a sole trader, then it makes no difference. I own multiple companies, in the sense that i am
Ian Wright T/A New World Designs
Ian Wright T/A Joomla Google Base
Etc

It makes no difference, the tax man doesn't care what your called, as long as your income and expenditure is declared so they can work out what tax you owe, thats all. The banks like to know a little more, but thats for their internal uses, not a legal requirement.

Most accounting systems now have Departmental accounting, sometimes called projects.

So you enter your invoice or receipts and in that page you will have a drop down list called department or project. You select the project/business and it assigns it. I have 5 sub companies, and each one in my accounts is a different project, so i can keep track of how much profit or loss each business is making.
http://www.joomlafinance.com/for-users/features#Projects

Hope this helps
Ian

 

[Scalloway]

You will need to complete two sets of self employment pages on your tax return. I would keep one set of books, with analysis to separate the bits that need to be kept separate.

Some expenditure will probably be common to both business, eg if both use the same premises. You can allocate these either expense by expense or just do a global split at the end of the year.

 

[Truemanbrown]

It is better to keep the businesses bookkeeping separate, as per Scalloway, because if one of the businesses makes a loss then, especially in the first four years of trade, you will have a lot of flexiblity in relieving that loss.

 

[da8iwr]

I think it is better for an accountant to keep them separate, as there is more work to be done and more money for the accountant . But if it is possible, fully legal, and easy to track through departmental accounting, then this is what i would do... and have done with 5 companies for the past 12 yrs.

I was a business banking manager for Lloyds TSB for 4yrs, and a business link advisor. I would always recommend to keep your costs to an absolute minimum for the first 12 - 24 months of trading, as you probably won't have a high turn over, you won't have many sales and on average i would probably expect one of those companies to be dropped after a year or so. So there is no point in getting more expenses than needed at the beginning, but there is nothing stopping you splitting them in the future if you find they are doing really well.

As i was saying, departmental bookkeeping, allows you to run reports and analyse exactly how much a sub department is making, costing, and losing as if they are separate companies.

 

[Scalloway]

I think it is better for an accountant to keep them separate, as there is more work to be done and more money for the accountant . But if it is possible, fully legal, and easy to track through departmental accounting, then this is what i would do... and have done with 5 companies for the past 12 yrs.

...

As i was saying, departmental bookkeeping, allows you to run reports and analyse exactly how much a sub department is making, costing, and losing as if they are separate companies.

As an accountant I would say that running them through the one set of books using departmental accounting to show the separate businesses would be perfectly adequate. There is no need for a small businees to complicate thing uneccessarily.

 

[Axiomi]

I would definately keep both sets of books seperate if you are not using a bookkeeping software at the beginning. It is also easier for someone who is inexperianced in bookkeeping to understand and I am assuming that you are otherwise you probably wouldn't be asking.

As has been said already - this will help you see if one business is underperforming easily as the bottom line will solely apply to that business.

Good luck with you endeavour.

 

[Scalloway]

Keeping separate sets of books only makes sense if you have separate bank accounts for each business. If you are self employed and VAT registered you will need to make VAT returns aggregating all your business activities - it is the individual who is VAT registered.

 

[123Simples]

Donna
It would be easier to keep 2 separate sets of books (or accounts) as you will have 2 separate businesses. When you complete the self assessment online it will ask you to complete it as two separate businesses anyway. Keeping things separate does make sense, but most importantly it will be what works for you that you need to discover.

It's all very well having an accountant if you have lots of income and expenditure, with complicated figures, vat registrations and so forth, but if these are simple businesses you keep a good set of records, and it is fairly easy to do your own tax returns using Inland Revenue online