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Limited companies
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I have been asked by a friend who has his own one-man electrical business if I will become a partner/director, in name only, so that he can become a limited company. I would only provide the title of director and provide a home address because he does not yet have an address of his own since splitting up with his fiancee.
What are the dangers and pitfalls if I choose to go ahead with this plan?
What are the dangers and pitfalls if I choose to go ahead with this plan?
Answers
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Here you go this should help.
http://www.companieshouse.gov.uk/about/gbhtml/ gba1.shtml
There are obviously dangers involved so if you dont want to get involved it might be worth him speaking to his accountant who may be able to act as his company secretary and obviously provide a registered address, as thus he can be the Director of his own company. They normally charge a nominal fee for doing this and getting all the forms sorted though.
http://www.companieshouse.gov.uk/about/gbhtml/ gba1.shtml
There are obviously dangers involved so if you dont want to get involved it might be worth him speaking to his accountant who may be able to act as his company secretary and obviously provide a registered address, as thus he can be the Director of his own company. They normally charge a nominal fee for doing this and getting all the forms sorted though.
I wouldn't do this at all unless you both intend that you take a role in the business. For a start your home address will become the registered address for the limited company, which means all the stuff from Companies House, HMRC (PAYE and CT) will come to you. Plus all the junk mail.
Limited companies have to have public liability insurance and that will have to be displayed at your house as well (should look nice in the kitchen next to the clock, I suggest).
If he doesn't administer the business properly, you could be liable as a director for the maladministration (though your fiancial liability would be limited to your stake, which I assume would be nominal.
This is not the way Companies House intend that businesses are set up.
Limited companies have to have public liability insurance and that will have to be displayed at your house as well (should look nice in the kitchen next to the clock, I suggest).
If he doesn't administer the business properly, you could be liable as a director for the maladministration (though your fiancial liability would be limited to your stake, which I assume would be nominal.
This is not the way Companies House intend that businesses are set up.
I agree with everything buildersmate says, especially about Junjk Mail, but would add that you could become personally liable for the debts of the business if Companies House feels that the Directors of the Company did not trade withthe best interests of the company at heart.
The Limited Liability only goes so far - you could be black marked and struck off the Directors Register, they can ban you from being a Director in the future and impose fines to you personally - rare, but it does happen. Study the Directors and Secretaries responsibilities guide on the web site. If the Limited Company has trouble with the VAT, expect the Customs and Excise to come barging your down- they have no sense of humour and couldn't care less what argument they hear from you - they have heard it all before. They are highly trained to be totally unreasonable
The Limited Liability only goes so far - you could be black marked and struck off the Directors Register, they can ban you from being a Director in the future and impose fines to you personally - rare, but it does happen. Study the Directors and Secretaries responsibilities guide on the web site. If the Limited Company has trouble with the VAT, expect the Customs and Excise to come barging your down- they have no sense of humour and couldn't care less what argument they hear from you - they have heard it all before. They are highly trained to be totally unreasonable
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