Setting up a Ltd Company and still working as a Sole Trader

[David-Web-Guy]

I'm in the process of setting up a partnership with a client to create a Design Agency, we are looking to go Ltd. I’m a freelance web designer and I have some client and projects that I can’t bring into the Ltd Company as this is work from other designers. Can I be a director of an Ltd company and still a sole trader? My potential new business partner is aware of the work that I do and understands that I can’t let them down.

 

[Bob]

Should be no problem but you do need to make sure that you get a shareholders' agreement with your new partner. You could include a clause in that agreement about your sole trader business. Many of the problems posed on here have arisen due to no formal agreement

 

[faradaykeynes]

how much time per week you would be working as sole trader?

 

[The Resolver]

Should be no problem but you do need to make sure that you get a shareholders' agreement with your new partner. You could include a clause in that agreement about your sole trader business. Many of the problems posed on here have arisen due to no formal agreement

Good call from Bob. Search 'Shareholders Agreement' on UKBF for the threads and also you can see my page on the subject. The point is that without a clause in which your co-shareholder agrees to your sole trader work, which effectively is a competitor to the company, you would be potentially in breach of your duty as a director under s172 of the Companies Act 2006 and open to litigation if he denied what he had verbally agreed, or a new shareholder comes in ignorant of this arrangement. But even if he did not seek to in future deny what had been agreed without a written Agreement setting out clear boundaries for the work you can do outside the company, there might be misunderstandings and thus disputes over such boundaries. I can also see potential problems and disputes over issues such as design and IP rights to web designs, equipment, design software etc used in both businesses plus sharing your time between clients etc.This can all be simply sorted out so very doable as an arrangement but just needs clarity

 

[accountsandlegal]

Great advice from Bob and The Resolver. There is nothing stopping you from being the director of a Ltd Company and a Sole Trader but a shareholder agreement would protect you both if lines ever became blurred between your ventures.