Funding a new business with existing business money

J

johnfrancis

Registered User
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16
Hello,

I'm hoping to get some advise.

I set up a limited company 2 years ago and things have gone quite well.

I am considering starting up a completely different company which will be focused on ecommerce and online sales in a different area. I am thinking this is a business which could potentially be sold off after a number of years. A VAT number would be required.

Would it be possible to fund the new startup costs with accountants etc and some stock purchase with profits from the existing company. Could it be a loan ?

Thanks in advance.
 
You really need to sit down with a good accountant and tax advisor and tease all these issues out to find the best structure.

By all means, get some ideas on askaboutmoney but validate them with your professional advisors.
 
The first question to ask is how you are managing the cash from the existing company.

Are you letting it pile up or are you taking it out? If you don't need it, you should probably be taking it out to avoid double taxation.

Now, if you have that cash in your own pocket, you can use it to set up the new company.
 
I am not a tax expert...

But you probably could set up the new company as a subsidiary of the existing company to minimise risk.

Losses in the new company could probably be offset against the profits of the existing company.

If it's successful, you can sell it off, but the problem is that the money and profit from selling it would be stuck in the company.
 
I have to say that I like keeping things simple.
They are separate companies? Keep them separate.
Take the profits out of the existing company and use them to fund the new company.
If it's successful and you sell it on, the gain on selling will be in your name and you may be able to avail of Entrepreneurial Relief.

If it's unsuccessful and you close it down, you can use the losses for CGT purposes against later capital gains.
 
Definitely as already suggested seek professional advice - you could set up second business as a subsidiary, or set up both companies in a Group - in either case Co A would be able loan Co. B start up funds
 
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