Is it best to expand existing company or set up a new LTD company in a new area?
I am a private indiviudal operating as a sole trader. I have exclusivety on my product in the UK. I have plans to expand and grow into a LTD company early next year - however I have had interest in my product from another location who are keen to operate in their area. Should I form a LTD company with them and operate in their new area (they have the funds to invest)? When I want to expand my own area (once I am too a LTD company) is is better to set up new companies with new partners or try to run this as one larger organisation?
Asked by Paul Nixon,
October 2009 - Contact this person
1 Answer
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Hi Paul,
I think you need to clear on what your motivation to register as a limited company is. If you are currently a sole trader and that mode suits you, then registering as a ltd is only likely to create more red tape for you in terms of filing accounts, health and safety etc. It is probably best avoided until you really need to i.e. you start employing people or any liability from the business need to be separated from your private assets.
It's tricky to offer any more specific thoughts, as it is not clear from your post if the new ‘location’ is in the UK and if the ‘area’ is a different market for the same product that has repercussions on the exclusivity. Is the ‘exclusivity’ a licence to manufacture or sell in the UK for a specific market? Or is it just that only you currently make it – in which case that might be a competitive advantage, but would be far from exclusive! My view is that you should avoid creating lots of companies that are all doing roughly the same thing, if one will do. Keeping it simple is always the best way forward and is likely to be more economic for you and any future partners. There are other ways of achieving what you might need including licensing or franchising - which can all be kept within one company.
Phin
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