J
JamesB
Guest
Hi AAM users,
I'm currently a contractor (sole trader) in the services industry. I am currently setting up my own limited company as many of my clients will not hire sole traders and I have 1 or 2 questions if anyone could kindly answer them.
Firstly, I am told that the normal way to set this up is to have 2 directors and issue 100 shares in some proportion between the two people. Having read a few threads here I am led to believe that leaving money in a services company and distributing in later years (eg next year if I decided to take a year off to travel the world) is not a good idea because of an extra tax on top of the 12.5% because I'm in the services industry. Also, distributing wages as dividends is also not a good idea from what I read.
Q1:
My question is, say for example I were to make my mother a director because I need 2 directors. It wouldn't really matter what proportion I issue the shares in (provided I give myself more than 50%) because I don't intend to leave money in the company hence the company is worthless?
Q2:
Secondly, my mom is a housewife so could I legally pay her a wage/salary although she wouldn't really be doing anything for the business (just say she is doing secretarial work or the equivalent)? Can I pay whoever I want a salary?
The reason I thought that there may be controls on these things is that couldn't a director just pay their unemployed friend a salary, who then returns that money to that director effectively reducing their overall tax allowance? (not that I have the slightest intention of doing this!!)
Q3:
Finally, I'd just like to ask if there is anything else I should consider when setting up my limited company for the first time? I intend to stay contracting for the long term and would really like to ensure that I get this set up correctly first time.
Any help would be very much appreciated.
James
I'm currently a contractor (sole trader) in the services industry. I am currently setting up my own limited company as many of my clients will not hire sole traders and I have 1 or 2 questions if anyone could kindly answer them.
Firstly, I am told that the normal way to set this up is to have 2 directors and issue 100 shares in some proportion between the two people. Having read a few threads here I am led to believe that leaving money in a services company and distributing in later years (eg next year if I decided to take a year off to travel the world) is not a good idea because of an extra tax on top of the 12.5% because I'm in the services industry. Also, distributing wages as dividends is also not a good idea from what I read.
Q1:
My question is, say for example I were to make my mother a director because I need 2 directors. It wouldn't really matter what proportion I issue the shares in (provided I give myself more than 50%) because I don't intend to leave money in the company hence the company is worthless?
Q2:
Secondly, my mom is a housewife so could I legally pay her a wage/salary although she wouldn't really be doing anything for the business (just say she is doing secretarial work or the equivalent)? Can I pay whoever I want a salary?
The reason I thought that there may be controls on these things is that couldn't a director just pay their unemployed friend a salary, who then returns that money to that director effectively reducing their overall tax allowance? (not that I have the slightest intention of doing this!!)
Q3:
Finally, I'd just like to ask if there is anything else I should consider when setting up my limited company for the first time? I intend to stay contracting for the long term and would really like to ensure that I get this set up correctly first time.
Any help would be very much appreciated.
James