Running one business is plenty of work by itself, but it’s not unheard of for some people to run multiple businesses at the same time. These might be sole trader enterprises, limited companies, or a combination.
There aren’t any rules to say that you can’t run more than one business, but doing so can sometimes have an impact on registering your businesses, paying tax, and keeping records. And those are just the legal considerations.
Before you go full steam ahead, you might need to work out some of the logistics too. Where will you need to be, and when, for example. If you can’t clone yourself, taking on too much might undermine what you’re trying to achieve.
We’ll look at the legal ins and outs, and share some tips to help you stay on top of things.
Can a sole trader own more than one business?
Yes, you’re allowed to run more than one sole trader business at a time, and there isn’t a legal limit on how many sole trader businesses you can have.
What’s important for sole traders to remember is that there isn’t a legal separation between you and the business like there is in a limited company.
As a sole trader, you and the business are viewed as one and the same in the eyes of the law. This means that your personal finances and assets are not separate from those of the business. So, whilst setting up as a sole trader is fairly simple, it also carries an element of risk.
What are the risks of multiple sole trader businesses?
If the business owes money, you owe money because you are the business – even if you run multiple sole trader enterprises.
The businesses might be separate but because they’re all attached to you as the sole trader behind them, the more than you take on, the higher the risk.
One of your businesses facing financial problems can cause a lot of strain, but seeing this across another business, or all of them, could be devastating for you personally as well as professionally.
We’re not trying to stamp all over your entrepreneurial ambitions, or put you off owning more than one business! But it’s definitely something to consider.
Does each sole trader business need to be registered individually?
Once you register as a sole trader, you are the business so no, you don’t need to register each of your businesses separately.
Doing this would mean you would be issued with a new Unique Taxpayer Reference (UTR) number each time, which would make things extremely confusing between you and HMRC.
Instead, you’ll need to fill out a separate section for each business on your Self Assessment tax return. So make sure you keep meticulous records so you can tell what’s what!
Paying tax and National Insurance for multiple sole trader businesses
Did we mention that as a sole trader, there’s no distinction between you and the businesses that you run? We know we’re repeating ourselves, but this has implications for your tax and National Insurance bill too.
Your Self Assessment tax return will deal with each business in a separate section, but your Self Assessment tax bill won’t.
Because you’re not separate to the businesses, HMRC will calculate how much you need to pay based on your total taxable profits as a sole trader. You won’t receive a separate tax bill for each individual business.
It applies to the total amount you earn in a tax year, from any source – and that includes an employer if you have one!
The trading allowance works to the same principle – you’ll only get it once. This means you can make up to £1,000 from self-employment before you need to pay tax, but you’ll need to work out the total amount you made across all of your businesses in the tax year. There isn’t a separate allowance for each sole trader business you run (sorry).
VAT for sole traders who own more than one business
UK businesses only need to register for VAT once their VAT-taxable turnover hits the £85,000 registration threshold.
In the same way Income Tax and NI are calculated for a sole trader based on their total income streams, this also applies to VAT.
You will only need to register for VAT once your combined VAT-taxable earnings go beyond the £85,000 threshold.
- So, if Business 1 makes £25,000, and Business 2 makes £40,000, your total self-employed income is £65,000, and you won’t need to register to pay VAT.
- If Business 1 makes £35,000 and Business 2 makes £55,000, the total is above the registration threshold, and you will need to register for VAT.
- If Business 1 makes a loss but Business 2 makes £87,000, you will still need to register for VAT because your total VAT taxable income has still surpassed the £85,000 threshold.
Can I own more than one limited company?
Yes, you are allowed to own more than one limited company and again, this can bring many benefits to your life, including financial success and entrepreneurial credibility.
However, it’s important to consider how you want to structure your businesses because there are pros and cons attached to each of your options.
You can either set up a separate limited company for each business, or you could operate them under one limited company, and use trading names. Let’s take a look at the advantages and disadvantages of setting up a separate limited company so that you can form a clearer idea of your best course of action.
The pros of setting up separate limited companies
- Each business’s finances and assets are ring-fenced: This means that if any of them experience any financial problems, none of your other businesses will be affected, and nor will your personal finances or assets.
- More clarity and less confusion for customers and clients: If your businesses are vastly different in what they offer, how they’re branded, or who they’re marketed to, it makes sense to keep them separate. Although chapped lips are an occupational hazard of working outside, customers might wonder why a landscaping company is selling them lip balm.
- Clear-cut boundaries when it comes to investment: If you decide to seek investment, setting up a separate limited company protects your other business interests, and makes it easier to show investors what they’re getting involved in.
Things to consider about running multiple limited companies
- Plan how to pay yourself: If each business operates as a separate company, you’ll need to think about how you plan to take money from the business to pay yourself. This might mean you pay yourself a salary from one business, and dividends from another, or some other combination. It’s important because it affects how much tax you and the businesses pay.
- More admin: When you run separate limited companies, they’ll each need their own tax returns and accounts. No matter how you structure things, you can use bookkeeping software to help your records stay clear and accurate, without the admin becoming too much of a drain on your time.
- More fees: If you do enlist professional help, such as an accountant or solicitor, fees will usually apply for each individual business.
What does this mean for tax?
Whilst sole traders aren’t separate to their business’s finances, the opposite is true for the owner of a limited company.
You’ll need to submit a Company Tax Return for each limited company, and then include any personal income on your Self Assessment tax return. Each company will receive its own bill for Corporation Tax, too.
Remember: If your companies don’t have the same financial year, the deadlines for submitting your returns and paying the bills might be different!
Some things to consider before owning multiple businesses
It will be your own investment of time, energy and money that will dictate how many businesses you can realistically run or own. Although it might be tempting and exciting to start fresh new ventures from time to time, it’s important not to spread yourself too thin.
Taking on too much responsibility will take its toll on your efficiency and effectiveness as a business owner—but also on your wellbeing and personal life. With too little time, you also run the risk of making mistakes in your finances and accounting as well, which is never good news for a business owner.
Learn more about Pandle’s time-saving bookkeeping tools and features, and create your free account.