What are the advantages of running more than one business under one limited company?
If a company decides to significantly diversify, it will often make more sense to trade the diversified business under a different name. Running more than one business under one limited company instead of incorporating new companies will have the benefit of saving time and money on company secretarial work, such as maintaining statutory registers, and also annual filings such as Confirmation Statements and annual accounts.
What are the disadvantages of running more than one business under one limited company?
Operating multiple businesses under one company may not always be the sensible option. You need to consider the implications of running the businesses under a specific structure before making a decision.
Profit and Loss Declaration
Companies operating different businesses under the same name usually have separate management accounts to show separate income and expenditure for each business. However, the financial results have to be published at Companies House and declared to HM Revenue and Customers (HMRC) by submitting one set of annual financial statements and the CT600 tax returns.
The tricky part is splitting the costs between each business individually. Allocating administrative costs to each business is not easy when you have separate businesses under one company name.
Isolation of Risks
Operating multiple businesses under the same name entails a risk since a failure in one business increases the chances of bankruptcy of the company.
Registering separate companies to manage different businesses will help in isolating riskier businesses. When you register multiple businesses as separate companies, the losses from risky businesses won’t affect the operations of profitable businesses.
Taxation Considerations
Registering separate businesses under different company names can lower the taxation amount. Limited company directors can elect to pay themselves salaries from the two separate companies up to the Class 1 National Insurance Threshold for which no income tax applies.
The directors can then top up the income by taking dividends from the two companies.
Multiple limited companies
If the companies are genuinely different businesses, this may help to ring-fence certain liabilities if one company finds itself in financial difficulties.
It can also help to secure investment or sell a particular venture further down the line.
However, maintaining multiple limited companies requires a lot more administration and accounting, which may outweigh any benefit for smaller businesses with relatively straightforward tax affairs.
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