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Company setup and Merchant accounts


di11on

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Hi folks,

 

I'm setting up an e-store and was wondering if most people have set themselves up as limited companies, or if they are trading as sole traders.

 

It's seems that if I want to have a merchant account, I will need to set up as a limited company. Is it possible to set up as a sole trader and still get a merchant account? The process of registering a limited company in the UK seems quite involved and the filing obligations etc, seem quite onerous! Penalties for late filing etc!

 

So my question is: Do I need to set up a limited company or does trading as a sole trader work?

 

Secondly, if I do set up as a limited company - I presume most people have used agents to do this? How much have people paid for this service and can anyone recommend a good company formation agent?

 

What are people doing out there?

 

I'd be very grateful for your experiences and suggestions.

 

Cheers,

 

Jody

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I setup a limited company as some suppliers prefer dealing with them and I think it makes you look more professional. I also choose to be limited as its my first business if it ended badly I would have limited liability protection.

 

I used http://www.a1companies.com/ through a friend whos an accountant. If you know an accountant they ussually have a discount with these kind of companies and can get it cheaper. The best thing was they set me up a business account with Barclays without me having to mess about showing a business plan to a local business advisor or any such agro. I had a Barclays account open with in a week just by sending them a fax.

 

If you haven’t already tried to setup a business bank account its not just a matter of walking in off the street. They want to know everything about your business and the attitude I got off banks “small business advisors” was terrible. They where really unhelpful and condescending and I even had clear planning and projections. I wasn’t asking for any money which I think disappointed them.

 

Being limited means you need to budget for about ?400 per year accountancy fees up to ?750 when your VAT registered. There are tax benefits though if you end up making a decent amount of money.

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Anyone else have anything to say on this?

 

I'm now thinking about a Limited Liability Partnership which seems to offer a better balance between the advantages of a seperate legal entity and the fling/administrative burden of running a company.

 

Anyone any thoughts on this?

 

Thanks,

 

Di11on

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Are you going to setup a company in the UK or in Ireland? Just asking as I was checking about all this about half a year ago and most information I found was related to UK and not to Ireland.

 

I think basically it depends on the kind of business you are setting up. If you have to buy a lot of stock and especially expensive items you are certainly better off as a limited company. Unless you have a lot of capital upfront you will need to get credit with your suppliers. If things go wrong and your business is not taking off as planned you end up with depts that are going to be taken out of your private possessions. A limited company can simply go bankrupt without touching your private possessions.

 

But as said before, there are a lot of obligations a limited company has to deal with. If you have some business knowledge it is possible to do most of the stuff yourself. Even registering with the required memos etc or filing your annual returns. You don't need accountants and solicitors but... being in Ireland it seems to be impossible to get some kind of book that tells you how these documents should look like or what accounting plan you could use. I guess this is the big "secret" of your advisors and I'm not sure they'll let you in on this.

 

My shop is going to import German products (mainly foodstuffs) to Ireland. This is just a niche market for Germans living here and who miss this and that. I am not going to open a real shop unless there is a real demand and this would be as a limited company only. Now I backorder in Germany as soon as the customers pay with me. No stock involved, no credit with the suppliers. The only risk I take right now is that I waste my time with setting up a shop where there is no demand. I can live with this as I learned so much about business, php, html and mysql the last months.

 

I will trade as a soletrader with a registered business name. I got myself registered for income tax and VAT, had to register with the HSE too and hopefully the bank will approve my application for a business account (they are offering a very good package for startups right now but I don't know if they are picky).

 

abra

The First Law of E-Commerce: If the user can't find the product, the user can't buy the product.

 

Feedback and suggestions on my shop welcome.

 

Note: My advice is based on my own experience or on something I read in these forums. No guarantee it'll work for you! Make sure that you always BACKUP the database and the files you are going to change so that you can rollback to a working version if things go wrong.

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The other way to look at it is to keep your costs as low as possible for the first year or so until your site gets indexed properly by Google, etc. There are already enough cash outlays to make when starting a web business and until you get good traffic there won't be much in the way of sales either. Keeping your cost down during this phase might be a good idea. Start as cheaply as you can, ie: a sole proprietorship, paypal or 2checkout, etc. Then when the business is up and running and making money then move to the better payment processor and the limited company.

 

If you need financing I can't see that it would be any different overseas. A bank will want a personal guarantee for any loans, as well as some suppliers might also. Limiting liability might help you in case of a legal battle over your products, but not much else.

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Thanks again guys.. that's helpful.

 

The company will be set up in the UK, but I am based in Ireland. My sister who's brainchild the business is, is living in the UK and will be running it on a day to day basis. I'm registered myself as a sole trader here in Ireland.

 

You can find a lot of information about setting up a company in Ireland at the Companies Registration Office (CRO) here: http://www.cro.ie/. They are the Irish equivalent of Companies House in the UK.

 

I'm thinking the Sole trader route is probably the most practical to start out with. I wanted to avoid having to using 3rd party provders like PayPal and 2Checkout but it seems that they are the most pactical to use when starting out.

 

Can I get a merchant account as a Sole Trader?

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Thanks, found the CRO already and I got my business name registered there as well. I guess I found most of the info I was looking for when setting up a business. Or let's say I found what I thought might be relevant.

 

Good luck with your projetct!

 

abra

The First Law of E-Commerce: If the user can't find the product, the user can't buy the product.

 

Feedback and suggestions on my shop welcome.

 

Note: My advice is based on my own experience or on something I read in these forums. No guarantee it'll work for you! Make sure that you always BACKUP the database and the files you are going to change so that you can rollback to a working version if things go wrong.

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Thanks again for the comments people.

 

Perhaps someone could offer me some advice.

 

I started creating a website for my sister who has found quite a nice little niche market. Since building the site, I have found myself getting more and more involved in the business side of things.. setting it all up for her, getting her registered, writing the plan etc.

 

Does anyone out there have any experience of going into this type of endavour as a partner with someone else? What is the best way of doing it?

 

In so far as the store ownership goes, what percentage stake would be reasonable for the person who runs and maintains the website and hosting, sorts out the business end of things and looks after a lot of the admin - versus the person who runs the shop, buys sells and dispatches the products and adds them to the website? Or perhaps the partner should have no ownership stake, but could be paid a fixed fee, or a percentage of the revenue or profits?

 

I suppose it's more straightforward going into business with a non-relative... things can get tricky with family... I imagine!

 

I have an idea, but I want to hear what other's suggest to see if it's reasonable.

 

Thanks in advance,

 

Di11on

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I set up a ltd company 3yrs ago but purely because the first ?10K was tax free as opposed to if I was a sole trader, now GBrown is changing that so it wont matter and my web business will be as a soletrader. Although I am the sole director I only issued 51% of the share capital to myself, the other percent still remains unissued. I think proportion of the stake in the business should be measured on the basis of how much capital is introduced by the partners at the beginning.

If your sister doesnt have any salary to provide you for all the running around then I guess she could quantify that in terms of capital almost as if you are giving her a loan of say ?20K in the first year but then you cant turn around and still expect a salary in the first year since you have just invested it in a stake of the business. Thats the fair way I would go about it.

I havent mastered tracking my posts, If you dont hear back from me its because I couldnt find my original post not because Im ungrateful

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I set up a ltd company 3yrs ago but purely because the first ?10K was tax free as opposed to if I was a sole trader, now GBrown is changing that so it wont matter and my web business will be as a soletrader. Although I am the sole director I only issued 51% of the share capital to myself, the other percent still remains unissued. I think proportion of the stake in the business should be measured on the basis of how much capital is introduced by the partners at the beginning.

If your sister doesnt have any salary to provide you for all the running around then I guess she could quantify that in terms of capital almost as if you are giving her a loan of say ?20K in the first year but then you cant turn around and still expect a salary in the first year since you have just invested it in a stake of the business. Thats the fair way I would go about it.

 

That makes a lot of sense... thanks!

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