If you’re an entrepreneur looking to diversify your offerings, you may wonder whether you can operate more than one type of trade under a single limited company. The short answer is yes, it’s perfectly legal and often practical to run multiple trades or business activities through the same limited company in the UK. However, it’s important to understand the implications, from accounting and branding to tax considerations.
How It Works
A limited company is a legal entity separate from its owners (shareholders) and directors. This structure allows you to engage in a broad range of commercial activities as long as they’re lawful and within your company’s Articles of Association.
Key points to consider:
- Memorandum and Articles of Association:
Your company’s governing documents typically list a general business activity. Since 2008, there’s usually no need to specify a single restrictive trade. If you formed your company recently, it likely has a broad objects clause or none at all, giving you the flexibility to pursue multiple business activities without officially amending these documents. - Registered SIC Codes:
When you register your company with Companies House, you must select a Standard Industrial Classification (SIC) code that best describes your main activity. If you run multiple trades, choose the one that’s most significant in terms of revenue or operations. Additional secondary SIC codes can be added, if needed, to represent other activities. While this helps describe your company’s trades, it doesn’t limit your ability to operate in more than one area.
Accounting and Tax Considerations
Running two (or more) trades under one limited company can simplify some aspects of administration—just one set of company accounts, one Corporation Tax return, and one set of annual filings. However, it also requires careful attention to financial management:
- Separate Record-Keeping:
Even if you report one set of annual accounts, it’s wise to maintain separate financial records for each trade. This means tracking income, expenses and any liabilities independently. Doing so helps you understand the profitability of each activity, makes life easier at tax time, and simplifies decision-making about where to invest your efforts. - Tax Implications:
Corporation Tax is calculated on your company’s total profits, regardless of how many trades you carry out. Having two distinct streams of income doesn’t necessarily mean paying more tax—it just means you’ll need to ensure that each trade’s figures are accurately captured. Additionally, if one trade is VAT-registered and the other is not (or if one trade crosses the VAT registration threshold), you’ll need to be aware that VAT applies to the whole company, not just one part of it. - Payroll and PAYE:
If you have employees working on different ventures, you’ll still only have one PAYE scheme for the company. Clear internal records are crucial to attribute employment costs appropriately.
Branding and Marketing
From a customer-facing perspective, you may want to present your multiple trades under distinct brand names. This is entirely possible:
- Use Different Trading Names:
A limited company can operate under various trading names. For example, if your company is ABC Ltd., you could trade as “XYZ Consulting” for business advisory services and “123 Design” for graphic design work. There’s no need to register a separate limited company for each identity, although you must ensure any invoices, contracts and official documents clearly mention the name and registration number of your limited company. - Market Segmentation:
By creating distinct brands or separate websites and marketing materials for each trade, you can target different customer bases effectively. Just remember to keep transparent business practices and comply with consumer protection regulations, ensuring customers understand which legal entity is behind each trade.
Pros and Cons of Running Multiple Trades Under One Company
Advantages:
- Cost Savings: A single set of incorporation costs, one set of accounts, one annual confirmation statement, and generally simpler administration.
- Easy Setup: No need to form additional limited companies or manage multiple legal entities.
- Flexible Growth: Experiment with new business ideas under an existing structure without starting from scratch.
Drawbacks:
- Accounting Complexity: More complex internal bookkeeping to track performance across trades.
- Brand Clarity: Balancing multiple brands under one legal entity can be confusing if not managed well.
- Liability and Risk: All activities fall under the same limited liability “umbrella,” so if one trade runs into legal or financial difficulties, it could affect the entire company.
When Might Multiple Companies Be Better?
In some cases, it may make sense to form a separate company for a new venture:
- High-Risk Activities: Separating a high-risk venture into its own company can help contain financial or legal liabilities.
- Different Ownership Structures: If you have different partners or investors for the second trade, forming a separate limited company may offer clearer governance and profit-sharing.
- Future Exit Strategies: Keeping trades under separate companies may make it easier to sell one part of the business without affecting the other.
How We Can Help
At our company formation agency, we can guide entrepreneurs and small business owners through the complexities of starting and growing their ventures. Whether you’re running multiple trades under one company or considering separate entities, we can help with:
- Advising on the best company structure to suit your goals
- Setting up SIC codes and ensuring compliance with Companies House filings
- Clarifying VAT and tax obligations for different lines of business
Final Thoughts
It’s entirely feasible to run multiple trades under one limited company, and many entrepreneurs do so to streamline administration and maintain flexibility. However, it’s crucial to maintain clear financial records, stay compliant with UK regulations and present your various business activities professionally.
If you’re considering expanding into a new line of work under your current company or need advice on how to structure multiple trades, get in touch with us. We’re here to help you navigate your path to success.