Startup - corporate group structure advice

[garyl163]

I'm looking to take my civil engineering sub-contractor company to the next level and wondering about what kind of corporate structure to implement.
Would a group structure complicate things at a startup phase, or would these things best be set up from the off.
I want to provide a turnkey solution to the BT Openreach Fibre Rollout; civils, traffic management, fibre splicing, etc, and was wondering whether to do this by was subsidiary - ie, each subsidiary being 1 turnkey, with holding company and management company, and scaling up nationally, or does this create more headaches.
Also, where would this type of structure leave me in terms of overheads; for instance, would group business insurance, vehicle insurance, etc, be more expensive?
Then there's on-boarding with contractor companies: would there be resistence to on-boarding a company with certain corporate structures.
A lot of the contracts are regional, with a view to scale up nationally, given resources. I want to set up regionally, balance the work between working direct and sub-contracting the work on - depending on resources and cash flow, etc, building a regional infrastructure, and cementing a foothold by bidding for and winning further local work. Then repeat. Would a Holding Company be a safe way through which to scale up and ring fence our regional and national infrastructure ambitions.
Are there any other considerations that I am missing? Obviously, tax is one.
Any replies would be much appreciated.

 

[Scalloway]

Creating a group structure automatically creates more expense as each company will have overheads duplicated.

Is there a reason why you don't just set up divisions in the existing business?

Have you run this by your accountant?

 

[garyl163]

Creating a group structure automatically creates more expense as each company will have overheads duplicated.

Is there a reason why you don't just set up divisions in the existing business?

Have you run this by your accountant?

Yes, that seems like the most obvious way to do things. I think I'm over complicating things: I basically just want to be able to ring fence assets from risk (in a very risky industry), and be able to grow in the most tax efficient way.

I think I got fixated on the subsidiary structure because I was considering going into business with 2 friends, whose companies would have allowed us to bring a full turnkey solution to market.

 

[WaveJumper]

I am no tax expert and sitting down with your accountant has to be your number one priority. As mentioned above the more companies you have the more accounts required as an example my son has three and it’s surprising how quickly costs can mount. Yes, a Holding company can ring fence your assets then the other company split into divisions.

Bottom line advice from a non-tax expert is keep it simple don’t over complicate it to begin with. And my last thought would be is it really necessary to form LTDs with your friends could you all coexist running separate companies. I say this as the forum is littered with people who went into business with friends and lived to regret it.


Accountant / Tax advisor
Don’t over complicate it
Business and / with friends tread with caution (and if you do get proper legal advice)

 

[garyl163]

Yes, I went cold on the idea of going into this with friends as I felt that we were emphasising different things in our informal discussions, and decided that what could be gained by pooling resources could in no way justify having to compromise the things I feel strongly about how a company should be ran.

You have definitely given me food for thought. Thank you for your replies.

 

[The Byre]

I think I got fixated on the subsidiary structure because I was considering going into business with 2 friends, whose companies would have allowed us to bring a full turnkey solution to market.

Oh dear! There's that alarm bell going off in my head again! Friends! Ouch! (Or as Warren Buffett put it, "A friendship based on business is better than a business based on friendship!")

Hardly a day goes past on this forum without someone coming here for help because their partnership has all gone to pot and now they are facing ruin. And today was no exception!

Draw up contracts with them and each gets paid for their share, but Three Amigos (One for all and all for one!) sounds like a disaster waiting to happen!

You can all trade under one name, but then all contracts and websites and letters must make it clear that the work is to be carried out by three separate companies, each responsible for their part of the work. One name and one turnkey solution - but financial separation!