What would YOU do?

[Cibbersicks]

Hi Guys,

I would like a little advice, mainly due to the fact I have very few people around me with whom I can discuss this with as their knowledge on the subject is fairly limited. My current situation is as follows:

I am currently in full time employment and working on this in my spare time, evenings and weekends. I fully understand the implications contractually of me working on something else, however it isn't in direct competition with my current employer so I'm not really that fussed about it, plus this is for me to build a future with as a self employed engineer, which is much more important to me than being an employee. My current position is quite a demanding and responsible one.

I am currently setting up a small service based business which serves the engineering and manufacturing industry. The website has been live for around a month and I've received a fair bit of interest so far. I am not currently registered as either a sole trader nor limited company.

In terms of overheads, all my business requires from my side are my skills, a powerful laptop and some software, both of which I have now very recently purchased and kept the invoices for. I would like to register for VAT within 18months so to claim back the VAT on these items as they were quite expensive. I have £15k to either invest into the company, or use to cover my personal outgoings if I was to leave my current position to focus 100% on this. Bare in mind, a limiting factor of the business's potential is the fact that I am currently employed, and not able to focus much time during the day on it.

So, would you:

Leave your current position, register the company, open a bank account, focus 100% of your time on your new project and use some if not all of the investment to cover your personal outgoings in the meantime

Or:

Stay in your current position and continue to have your outgoings covered by salary, work as hard as possible during "out of hours times" and keep the £15k to put into the company if necessary - all of this is at the risk of not being fully dedicated to your new business venture.

My conclusion is to stay at my current employer for as long as I possibly can. During that time, work as hard as possible, only register the company when I ABSOLUTELY have to and keep the cash in the business to invest where required over time. It does bother me about not being able to push myself 100%, especially during "work hours". The first 12 months or more are the hardest, and if I can't go at it with my full attention, do I stand even more risk of failure?

 

[Mr D]

You absolutely will have to register the business at some point. Preferrably before HMRC start sniffing around.

From experience I'd say start building your business up part time. £15k can be blown easily.
While getting within reach of the business covering your necessary salary from its profits is an ideal it may be that circumstances won't let you reach quite that level before jumping.

Working as an employee for another company is nice and easy, you do the work and someone else gives you money.
Work with your own business full time and you may fondly remember being paid several times what you are getting, even being paid above minimum wage.
And the short hours you had to work for an employer, the paid holidays, the weekends / other days off.
Its quite possible with your own business to do hundred hour weeks with no days off and income of a pound an hour. And if your pay is too low you know exactly who to talk to about that - the person in the mirror.

 

[GTL]

I second the wise words of @Mr D .

I would also be inclined to set yourself up as a limited company and also to get VAT registered and get VAT registration, as well as a banking account in the NEWCO's name. It's just a credibility thing.

It costs little other than your time; as well as focussing your mind a bit on what you need to do to make it a success. Also, it gets it done.

However be aware that the Companies House register is public and online, so if there is any risk that your employer finds out you are a director - is there a risk of a disciplinary issue/being fired etc? (I know you are supposedly not competing, but....). if this the case, you may want to appoint someone else as the director (wife/partner?) and as long as you own all the shares, well preferably over 50%, ideally over 75%) you won't have anything to worry about control wise. Though I would suggest you retain banking responsibilities. You would be wise to get an accountant or bookkeeper, to keep on top of accounting and also statutory stuff like annual accounts/vat returns etc. This will cost a bit, but a qualified book keeper should keep you in check and will require little outlay to start.

In my experience, 15k won't last you very long. Of course you may succeed very quickly but break even can be hard to achieve quickly, and I mean break even which allows you to take a contribution which covers your costs.

Best of luck, and I suppose I should say I would caution at this point about doing anything which affects the relationship with your employer. Keep your nose clean and reputation intact. You never know when you may need them, were you to leave.

 

[Noah]

However be aware that the Companies House register is public and online, so if there is any risk that your employer finds out you are a director [...], you may want to appoint someone else as the director (wife/partner?) and as long as you own all the shares, well preferably over 50%, ideally over 75%) you won't have anything to worry about control wise.

Above 25% shares, OP will still be listed on CH as a PSC - not quite as prominent as Director listing, but still public.