Author Topic: Setting up as a "Limited company" Electronics engineer  (Read 47427 times)

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Offline FaringdonTopic starter

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Setting up as a "Limited company" Electronics engineer
« on: February 19, 2024, 05:04:42 pm »
Hi,
Do you know of any good ways to set up as a "Limited company" so that a company can pay me as a "supplier"?
Details of any costs etc much appreciated?[
I always had others do it for me in the past.

Now an actual company wants me to get a "Limited company" set up.
So they can pay me for PCBs delivered.
Ie, pay me based on "fixed cost vs fixed deliverable"
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Offline amiq

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #1 on: February 19, 2024, 05:22:50 pm »
WTF?  Unless you want to trade as a limited company (see an accountant to see if it's in your best interests) tell them to piss off.  If they're only able to make payments to limited companies they are seriously fucked up.
 
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Online tggzzz

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #2 on: February 19, 2024, 07:11:39 pm »
The OP has a reputation for asking, um, strange questions - and not revealing all pertinent information in his posts.

Previously https://www.eevblog.com/forum/work-wanted/how-to-start-company-in-switch-mode-power-supply-design/msg5212668/#msg5212668

Today he asked whether to use a water repellent to make keyboards less clacky https://www.eevblog.com/forum/repair/repair-laptop-keys-with-wd40-lubricant/msg5343713/#msg5343713

Yesterday he asked https://www.eevblog.com/forum/renewable-energy/making-a-50hz-power-sine-source/msg5340065/#msg5340065 Bear in mind he is a (self-professed) power supply professional who makes their living from that kind of thing.

Previously he entertained everybody with https://www.eevblog.com/forum/chat/a-new-type-of-electronics-degree-course/msg5250390/#msg5250390

Previously he bored everybody with https://www.eevblog.com/forum/chat/keeping-hold-of-electronics-engineers/msg5042023/#msg5042023
« Last Edit: February 19, 2024, 07:21:43 pm by tggzzz »
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Online jpanhalt

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #3 on: February 19, 2024, 07:43:13 pm »
Now an actual company wants me to get a "Limited company" set up.
So they can pay me for PCBs delivered.
Ie, pay me based on "fixed cost vs fixed deliverable"

I can't respond to the first part, as that depends on British law.  In the US, an LLC takes about 8 charged-hours with an attorney and $1,400 for mine.  A second one would cost less.  You can do a DBA yourself (i.e., doing business as fictitious name).  It's almost free.  One could do an LLC a lot cheaper using corporate templates, but in the US, it is state regulated and some states are very touchy about allowing individuals to practice law without a license.  The downside in those states (besides set-up cost) is that any matter involving the LLC -- even a single-partner one -- must be handled by a licensed attorney.

On the second matter, I have come across companies that require a corporate name, including LLC, to sell something to me as that creates a shield from our tort lawyers.  It's hard to imagine the reasons for requiring a corporate entity to buy from, unless it has something to do with your sales/VAT taxes.  In the US, typically the seller collects sales taxes from the buyer, but the buyer is still responsible for paying them if the seller keeps the money.   If  you fail to perform, it is easier to sue an individual, and your LLC/corporation may have zero equity from which they could get an award.  As an individual, your entire personal worth, immense as it may be, could be attached.

EDIT:  There is also the difference between an employee and independent contractor.  Maybe the company doesn't want the headache of having you as an employee.   UPS got into trouble for designating its delivery people as independent contractors, when it was pretty obvious they were employees.  In your case, it seems pretty clear you would/could qualify as an independent contractor.
« Last Edit: February 19, 2024, 07:49:55 pm by jpanhalt »
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #4 on: February 19, 2024, 07:47:44 pm »
There is no need to be a ltd company - you can work as a sole trader, and it shouldn't make  a difference to suppliers unless they have a stupid admin dept.
If you're dealing only with businesses and not consumers, it can be useful to be voluntarily VAT registered. as you will be able to claim back any VAT spent on equipment etc.
I'd say you're probably more likely to have issues with big companies if not VAT registered than not being a ltd. company


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Online jpanhalt

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #5 on: February 20, 2024, 09:15:18 pm »
Apparently the British "sole trader" designation is roughly equivalent to the US colonist's DBA designation.   It costs almost nothing to set up.   (I have two from years ago.)  That seems to be the preferred solution on another site on which he posts such rubbish.
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #6 on: February 21, 2024, 08:35:05 am »
Apparently the British "sole trader" designation is roughly equivalent to the US colonist's DBA designation.   It costs almost nothing to set up.   (I have two from years ago.)  That seems to be the preferred solution on another site on which he posts such rubbish.
It costs actually nothing - all you need to do is register as self-employed with HMRC ( Tax office). You don't need to register a trading name.
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Offline jc101

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #7 on: February 21, 2024, 05:50:29 pm »
For the UK, the HMG website gives the step by step requirements and some advice on if it's a good idea for you https://www.gov.uk/set-up-limited-company

Easy way, find a decent accountant, book a meeting with them (often the first one is free) to go through what you want to do and why.

If you setup as a company, then all the parts etc. need to be bought through the company.  So you can claim them as expenses, to offset against the profit on the invoices.  Not hard, just decent record keeping.

You can raise an invoice as self employed, to a clients company it's still an invoice that needs to be paid.  Unless they mean they only deal with VAT registered entities?  If VAT is involved, the combination of the OP and an VAT inspector would be worthy of being a ticketed event to watch.
 
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Offline fcb

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #8 on: February 22, 2024, 02:50:01 pm »
UK Limited company costs is £12.00 and you can even put that through your books. Takes about 15mins.

Bank account for Limited company: Free and painless to setup with TIDE/MONZO/REVOLUT/STARLING, etc.. takes a few days. Takes about 15mins.

VAT registration: Free and painless, again takes about 15mins.

Budget for a £1K per annum for an accountants to do accounts, PAYE, VAT returns, TAX returns. Accountants will also let you r/o (registered office) at their offices, which will help if you don't want your address publically searchable.

Sole trader saves some (all?) of the accountant fees, but arguably you'll pay more tax.  Main reason for a limited company is prestige(!) and limited liability, most companies in the UK expect to B2B transactions to be limited<>limited.
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Re: Setting up as a "Limited company" Electronics engineer
« Reply #9 on: February 22, 2024, 03:34:59 pm »
If VAT is involved, the combination of the OP and an VAT inspector would be worthy of being a ticketed event to watch.

 ;D
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #10 on: February 22, 2024, 04:04:12 pm »
No reason to have an accountant do VAT, get a decent accounts package (I use Freeagent, which works well) and it's a minimal amount of work.
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Online tom66

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #11 on: February 23, 2024, 11:00:01 am »
Be aware Companies House fees are increasing in May by quite a considerable amount. Was £12 will now be £50 and annual filing fee (for confirmation statement) is going to be £34 up from £13.

Unlikely to be financial devastating for power supply engineers in constant demand, though.
 
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Offline Psi

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #12 on: February 23, 2024, 11:12:56 am »
I have a bad feeling that the reason they want you to be a Limited company instead of a sole trader is because it "helps" them in some way and all things being equal if it helps them it probably hurts you.

Maybe some legal liability reason or something, dunno, I'm not an expert, but if they really want you to be a limited company they will have a reason for it and I would be very suspicious if you're not 100% sure you know what it is.

This feels like an internal HR/regulatory/legal request to try and offload some of their risk to you.
But I could be wrong.
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #13 on: February 23, 2024, 12:17:11 pm »
My guess is that some big companies apply a standard set of rules to any new supplier, including things like referencing, which is only likely to work with Ltd companies, as records can be checked at Companies House.
May also be part of anti-fraud, ensuring payments are being made to a known entity ( though from what I hear Companies House checks are laughably poor).

Bottom line : If the person you deal with at the company really wants your services, they will find a way round this.
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Offline PlainName

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #14 on: February 27, 2024, 06:18:36 pm »
No reason to have an accountant do VAT, get a decent accounts package (I use Freeagent, which works well) and it's a minimal amount of work.

What do you do about backups? I see from their website that 'backups' are exported data 'for record keeping' and cannot be restored. One reason why I use Quickbooks is because it's totally local and all data is backed up during normal system backup (and can be restored similarly).

I have no downer on a cloud solution for bookkeeping, but it is someone elses computer and although they bang on about how secure their systems are, I just don't feel happy not having alternative access to critical data. (I'm sure HMRC would be understanding if the dog ate my homework. Not.)
 
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Offline jc101

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #15 on: February 27, 2024, 06:24:06 pm »
Quickbooks desktop was discontinued in the UK last year.
Intuit are slowly moving all their products to cloud versions.
 
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Offline PlainName

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #16 on: February 27, 2024, 06:52:31 pm »
Yes, which is why I'm using QB2010 still  ;D
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #17 on: February 27, 2024, 07:07:50 pm »
No reason to have an accountant do VAT, get a decent accounts package (I use Freeagent, which works well) and it's a minimal amount of work.

What do you do about backups?
Trust that they do the job I'm paying them for.
« Last Edit: February 27, 2024, 07:13:45 pm by mikeselectricstuff »
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #18 on: February 27, 2024, 07:10:02 pm »
Yes, which is why I'm using QB2010 still  ;D
How are you dealing with the MTD online VAT return submission requrement?
That has made a lot of the older packages obsolete,   and pretty much all of the newer ones are cloud subs.
Although I dislike this in general, I've found Freeagent has saved me a ton of time and mostly "just works".
It handles things like awkward customers who insist on being invoiced in USD, and the bank integration makes checking transactions a breeze.
« Last Edit: February 27, 2024, 07:13:18 pm by mikeselectricstuff »
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Offline PlainName

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #19 on: February 27, 2024, 08:31:24 pm »
Before MTD became software only I did it manually - QB produced the details and I just copied into the relevant form on the HMRC webby. With MTD the same now applies, except I use a specific app to post the data.

Very old fashioned and not awfully slick, but OTOH it's a bit like routers having wifi and all that in the one box - that's great for those that want a quick solution, but having separate WiFi and router means you can upgrade (to, say, mesh networking) without having to change the router that took a long time to set up. So with the accounts I should be able to change the accounting software or filing software or invoice creation, etc., without affecting anything else. The expense is that I need to deal with the stuff and tie it all together.
 
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Offline FaringdonTopic starter

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #20 on: March 02, 2024, 12:05:19 pm »
Thankyou all, these are excellent replies...

Quote
I have a bad feeling that the reason they want you to be a Limited company instead of a sole trader is because it "helps" them in some way and all things being equal if it helps them it probably hurts you.

Maybe some legal liability reason or something, dunno, I'm not an expert, but if they really want you to be a limited company they will have a reason for it and I would be very suspicious if you're not 100% sure you know what it is.

This feels like an internal HR/regulatory/legal request to try and offload some of their risk to you.
But I could be wrong.

I  confess to not being well up in this financial  stuff.......but i believe as a SMPS/Electronics Engiener, you have much more chance of getting employed if you set up as a "sole trader" , or as a "ltd company". This is because you are effectively saying, "hey this is what i do, and if i electrocute myself, or drop a transformer on my foot, then its going to be all my fault".

So if it costs nothing to be a "sole trader", then that looks good.

From the above, it looks like being a "ltd company" costs £90 per year?

.....It seems worth it, because every company that you go into, are paranoid about you having an accident and then they being  liable.
i reckon one would get more work offers if going "sole trader" or "ltd company".

So i guess, supposing an EE sets up as a "sole trader" or as a "ltd company", then you need  , every year, to pay an accountant to "do the tax return"....and this also applies even if you didnt even work as a "sole trader" or "ltd company"  in the last 12 months....so my question if i may, is,  how much do you have to pay an accountant to do a tax return if you didnt actually work as a "sole trader" or "ltd company" over the last 12 months?

Also, supposing one accepts a permanenet  job, going under PAYE, then do you have to close down the "sole trader" or the "ltd company"....and if so, how much does it cost to close it down.
« Last Edit: March 02, 2024, 12:08:03 pm by Faringdon »
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Offline PlainName

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #21 on: March 02, 2024, 12:40:13 pm »
Quote
So if it costs nothing to be a "sole trader", then that looks good.

The cost is you don't get the benefit of being an employee: no sick pay, no paid holidays, cost of providing your own tools, etc. Plus you get to be personally sued if you screw up (and sometimes even if you don't), potentially for millions.

The attraction of the limited company is that when it goes tits up, gets sued for millions or whatever, it's the company that is the target rather than you personally. With a few exceptions you can just walk away and be done (but, note, that anything the company buys is the property of the company,  not you).

Accounts have to be done every year and unless you are supremely confident about money then you want an accountant to do it. What they cost is between you and them, but figure on around £500-£1000. If the company has done nothing all year, you still pay the accountant to do the filing. They may do it for a reduced rate but, again, that's between you and them. Figure on it being a fixed cost per year regardless.

Finally, if you're running a limited company (or as a sole trader) and you get to be an employee elsewhere, that's not a problem. You're just an employee of two places and pay appropriate tax at each place. You can keep the limited company going or  not - depends on how much hassle it is to shut it down and whether you might want to use it again. You could get your limited company to sack you so you are no longer an employee of it, but you'd remain a director.

Regarding the question of why some place might prefer you to be a limited company, it's possible that it's perceived as being more business-like than some fly by night chancer. But, most likely and as someone noted previously, it is probably a VAT thing - they might assume that a limited company would of course be VAT registered.

VAT registration is useful for getting stuff apparently cheap, but note that it is the property of the company and there are hassles involved (like filing your VAT returns every month, even if you don't buy or sell anything), and not using company property for private stuff (so you might be able to justify that 60" TV on the grounds of needing a big monitor, but you shouldn't use it to watch Netflix with your cocoa before bedtime without either the company charging you for that (plus VAT) or you noting it on your self assessment).
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #22 on: March 02, 2024, 12:55:43 pm »

VAT registration is useful for getting stuff apparently cheap, but note that it is the property of the company and there are hassles involved (like filing your VAT returns every month, even if you don't buy or sell anything)
More typically every quarter - I think you can also do annual, but I wouldn't recommend it as it's too long to remember what particular transactions were for.

If you use something like Freeagent, this is a simple as making sure all transactions are "explained" - it imports data from bank and credit-card accounts - it learns your typical transactions/suppliers so afer the first few months this is just a case of clicking "OK" on each transaction to confirm it's allocated it to the right category.
Submitting the VAT return is then literally a couple of  clicks. Last one took me 5 minutes. When I was using Quickbooks, it took about half a day to enter all the transactions and reconcile bank accounts every quarter.
The automatic linking to bank/card accounts on modern accounts packages is a total game-changer.

For sole trader, if things are fairly simple you don't need an accountant to submit VAT or tax returns. I've heard multiple tales of accountants failing to submit things on time and the client getting penalised for it in various ways. For a simple sole trader there is  no reason to pay an accountant to submit VAT returns as these are simple with little scope for ambiguity/tax planning etc.

Definitely worth talking to an accountant when setting things up so it matches your needs. For more complex businesses, a good accountant should pay for themselves in tax savings.
 
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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #23 on: March 02, 2024, 12:56:52 pm »
Plus you get to be personally sued if you screw up (and sometimes even if you don't), potentially for millions.
You can get professional indemnity/liablity insurance to (hopefully) cover that.
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Offline PlainName

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #24 on: March 02, 2024, 01:18:02 pm »

VAT registration is useful for getting stuff apparently cheap, but note that it is the property of the company and there are hassles involved (like filing your VAT returns every month, even if you don't buy or sell anything)
More typically every quarter

Yes, you are right. I must've been thinking about something else (obviously a cost rather than benefit :) )
 
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Offline ebastler

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #25 on: March 03, 2024, 06:26:25 pm »
I  confess to not being well up in this financial  stuff [...]
From the above, it looks like being a "ltd company" costs £90 per year? [...]
i reckon one would get more work offers if going "sole trader" or "ltd company". [...]
then do you have to close down the "sole trader" or the "ltd company"....and if so, how much does it cost to close it down.

Pardon me -- but haven't you run your own Ltd. company before, as its director, 12 years ago or so?
 
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Offline FaringdonTopic starter

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #26 on: March 03, 2024, 07:11:08 pm »
Quote
It costs actually nothing - all you need to do is register as self-employed with HMRC ( Tax office). You don't need to register a trading name.
Thanks, if it costs nothing then i will register as a sole trader.
Though some posts here talk of £500-£1000/year accountancy  fees.
And doing VAT returns every quarter. (even if you dont buy anything)
Use of accountancy software which may cost much, and be very hard to use for the non-financially trained.

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Offline mikeselectricstuff

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #27 on: March 03, 2024, 07:33:55 pm »
Quote
It costs actually nothing - all you need to do is register as self-employed with HMRC ( Tax office). You don't need to register a trading name.
Thanks, if it costs nothing then i will register as a sole trader.
Though some posts here talk of £500-£1000/year accountancy  fees.
And doing VAT returns every quarter. (even if you dont buy anything)
Use of accountancy software which may cost much, and be very hard to use for the non-financially trained.
Freeagent is £165/year, less some introductory deals, and there are some free offers if you're with certain banks ( probably those that charge for business accounts, so likely best avoided)  - I think some accountants also offer it free if you use them, or it's part of their package.
You don't need any significant financial training to use it & can try free for 30 days.
For a simple sole trader setup it is pretty easy , and recent-ish things like 100% Annual Investment allowance allows you to treat equipment purchases the same as consumables so you don't have the hassle of accounting for capital write-downs etc.
« Last Edit: March 03, 2024, 07:35:30 pm by mikeselectricstuff »
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Re: Setting up as a "Limited company" Electronics engineer
« Reply #28 on: March 03, 2024, 07:40:11 pm »
Quote
Though some posts here talk of £500-£1000/year accountancy  fees.
only if you use an accountant. Its simple enough to do yourself ,just keep a record of everything you've earned and everything you've spent , a spreadsheet makes life simple.One thing to remember is to  keep your records,including receipts/invoices  for at least 6 years.
 
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Offline FaringdonTopic starter

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #29 on: March 04, 2024, 09:13:14 am »
Thanks, OK, supposing i (or anyone) jumps in and becomes a sole trader or a "ltd company".
...Then supposing i can't get the hang of the accountancy software, and the tax people then fine me goodness knows how much etc etc.
I mean already you have (kindly) used a term "financial write down" , which i dont know what it means.
So supposing  i jump in, and find that its just  costing  too much, the accountant wants £5k and if i dont pay him ill get fined £10k etc etc.........how do i then get out of it?, and how much does it cost to get out of it all?
« Last Edit: March 04, 2024, 10:31:07 am by Faringdon »
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Offline jc101

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #30 on: March 04, 2024, 09:28:54 am »
If a Ltd company, the debts are against the company.  So the company either pays up or is declared insolvent and the creditors can go after anything the company has.

If sole trader, you have to pay the debts.  If you can't, you declare yourself insolvent.  This has long term implications (min 5 years), and doesn't mean the debt is written off. 

Best source of info for both, find an account and have a meeting to discuss your situation and what is the optimal solution for you.  They will also cover the risks.  Often accountants will offer the first consultation free, on the presumption you will use their services.  If they charge, pay up and listen to the advice.

Depending on how you get work, in the UK there is also IR35 to consider - you can google that.  Again an accountant will know the gory details.
 
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Offline FaringdonTopic starter

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #31 on: March 04, 2024, 10:33:52 am »
Thanks, yes, "inside or out" is what you get asked constantly.
I dont see how i would be liquidated though, as i wouldnt be buying loads of stuff.....so i wouldnt get in debt.........it would just be for me working for  other people and them paying me...
'Perfection' is the enemy of 'perfectly satisfactory'
 

Offline jc101

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #32 on: March 04, 2024, 10:35:39 am »
If you are, in effect, only selling your time - talk to an umbrella company. 

Bring that up when to speak with an accountant.
 
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Offline jonpaul

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #33 on: March 04, 2024, 10:52:59 am »
Beware, Regulatory compoliance, product liability, insurance,

Suggest to consult attourney specialized in this area.

j
Jean-Paul  the Internet Dinosaur
 
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Offline FaringdonTopic starter

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #34 on: March 04, 2024, 09:16:45 pm »
Quote
Beware, Regulatory compoliance, product liability, insurance,
Thanks yes good point...though  we are more at the stage of working for a company, than for consumers, so we would expect their insurance etc would cover us, even though we are " sole traders"?
'Perfection' is the enemy of 'perfectly satisfactory'
 

Offline jc101

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #35 on: March 04, 2024, 09:28:09 pm »
"we" are not sole traders as a single entity, "you" could be a sole trader.  If there is more than one of you, there is the option of an LLP too.

I have to carry, or my Ltd company does, a minimum of £1m professional indemnity insurance.  It's mandated by the clients T&C's.  One wanted £5m, they conceded £1m would do after challenging it.

If you design anything, then professional indemnity insurance is a good thing to have.  If you are simply providing labour to assemble a complete kit of parts given to you, then probably not so much.
 
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Offline ebastler

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #36 on: March 04, 2024, 09:35:52 pm »
If you design anything, then professional indemnity insurance is a good thing to have. 

Liability and warranties can always be defined in the contract. It's a matter of negotiation, I'd say. But as you described, the customer may just not be willing to sign a "best effort, no warranty, all liability rests with the customer" contract.

And even in the best case it will be hard to negotiate away liability in case of neglicence, so some type of indemnity insurance will probably be required.
 
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Offline jonpaul

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Re: Setting up as a "Limited company" Electronics engineer
« Reply #37 on: March 14, 2024, 12:32:43 pm »
Hell again:

The lawyers use a boilerplate and keep def of liab as wide as possible.

  contracts are biased towards the writer eg large firm, customer. We mad eour own T&C exactly to limit liab in any proposal.

 So, depending on the venue and legal advise, an LLC, indicvidaul or small firm has unlimited liabilty for sales or services to anothe firm.


PLEASE CONSULT AN LISCENCED ATTOURNEY AND COMPLIANCE FIRM IN YOUR LOCATION.

THIS IS NOT LEGAL ADVICE WE HAVE NO LIABILITY

 Good luck

Jon

Jean-Paul  the Internet Dinosaur
 
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