Consulting while bootstrapping. How to organise company?


4

I'm a developer who has just sorted out part time consultancy work which I would like to use to maintain myself while bootstrapping a SAAS startup as a solo (for now) founder.

Given that I'd like to offset the some of the costs of my startup, how should I set things up? e.g. incorporate, make myself employee of new company, rent myself out to employer? or should I just take the money myself and invest into the startup company?

I'm in the UK if that helps.

Incorporation Consulting Tax

asked Mar 18 '11 at 03:28
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Macca
131 points

2 Answers


2

Not sure what they call it in the UK, but in Australia it's called sole-trading or sole-proprietorship. Start a sole-trading account for yourself as a contractor and incorporate the business using a trust and a limited liability company as a trustee to hold the intellectual property and another limited liability company to run the actual online service. This structure will protect your source code. Don't forget about the source!

As an individual, any work you do for the business is invoiced to the IP company. So this is standard income for yourself. This is useful starting up, because you can deduct the money you use to create the business from your personal taxes and you can invoice the IP company later in time after you've accumulated money in the bank.

The IP company will pay your invoices using the money it makes through it's online services / advertising. Once you have all your expenses paid and the business is cruisin' on its own, you'll need to start paying yourself through the trust. And you do this using an agreement between the trustee and the IP company such that a certain percentage of the profits is sent to the trust.

The trust is where you get to divide the money between you and anyone else you bring on board.

Have a talk with an accountant about ALL of the above. This is standard stuff to them.

answered Mar 18 '11 at 08:04
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Laith
344 points

1

To create a SAAS startup you'll realistically need to be a limited company at some point. The only thing to be careful with is whether you fall under IR35 for paying yourself dividends instead of a salary whilst doing the consulting.

If that doesn't make much sense to you, I'd strongly advise to see an accountant.

answered Mar 18 '11 at 07:26
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David Benson
2,166 points

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