You may be surprised to know that there is nothing to stop you from running several businesses under a single limited company. In fact, this is common practice because it enables business owners to have multiple brands and expand into different markets over time. In this article we will explain the pros and cons of running multiple businesses under a single limited company and some key tips for achieving success.
Overview of running multiple businesses
UK company law makes it perfectly possible for business owners to operate multiple businesses under a single limited company. For example, a limited company that provides building services may have separate but synergistic businesses in the areas of plumbing, electrical work, groundworks, construction etc. By establishing a different business for each function they can better differentiate the services that they offer.
As we will discuss later in this article, although running one or more trading names or brands has several advantages there are some limitations of which to be aware.
Advantages of using a single limited company
Operating multiple businesses under a single registered company offers a range of advantages, as follows:
Streamlining operations and management
You can gain considerable cost and efficiency benefits by putting in place a single operational and management structure capable of running multiple businesses. You have a single management, Human Resources, marketing, sales, and distribution and logistics team running your businesses. Not only does this reduce cost but it will also ensure that your management approach and strategy can be replicated across all businesses. This, in turn, creates a standardised and consistent experience for customers.
Enhanced Brand Image and Credibility
For many companies, using multiple businesses under a single company is crucial in developing their overall brand identity and credibility. Unfortunately, building brand awareness and credibility can often be challenging when a company offers various products and services. Using separate businesses can make clearer the products or services that you offer and thereby help prospective clients to understand what you do, e.g. “Mega Plumbing”, “Mega Electricians” and “Mega Construction” – thus creating three brands under one overall name.
Flexibility and ease of change
Sometimes businesses need to respond quickly to new market conditions. Businesses operating under a single limited company do not require their own registration with Companies House. Hence, it is possible to establish a new brand quickly and easily. This can be highly advantageous for businesses that seek to diversify their offerings into different market sectors.
Financial Benefits and Tax Efficiency
If you run more than one business under a limited company then you need to file only one set of company accounts with Companies House. Likewise, you will need to file only a single Company Tax Return with HMRC. The annual accounts and tax returns that you file will be an amalgamation of all of the accounts for each business to show an overall financial picture for the company as a whole. This reduces the burden on directors when it comes to meeting their director’s duties and obligations. In addition, tax and payroll are also handled at the company level rather than for each individual business.
Depending upon the size and structure of your businesses, you may still need to maintain separate sets of accounts for each business. This will allow you to determine independently the profit, loss, assets, liabilities and overall financial performance of each business.
It is always advisable to engage the services of an expert accountant who can handle the accounts of multiple businesses under a single limited company.
Improved website / SEO performance
Setting up multiple businesses and creating separate websites and social media accounts can improve your SEO performance and drive sales. Doing so avoids confusion both for potential customers and for search engines like Google because each product and service is clearly differentiated.
Disadvantages of using a single limited company
Despite the many advantages of using a single limited company for multiple businesses, there are some drawbacks of which company owners, directors, and members should be aware – as follows:
Potential Legal and Regulatory Issues
1. Lack of protection for your brands
It is essential to understand that business names are not protected in the same manner as company names. Although no two companies can be incorporated with the same name, there is nothing to stop another business from using your business name. This can lead to consumer confusion, impaired SEO performance, reputational harm, business interruption and lost sales.
Another disadvantage is that your business cannot apply to the government’s “Company Names Tribunal” to have action taken against a business with the same (or a similar) name. You can protect your business or trading name, however, by applying for a trademark.
2. Risk of claims for trademark infringement
Using a business name may also leave you open to potential claims for trademark infringement and “passing off”. This may occur if another business with trademark protection believes that your business name is too similar to theirs. This is why it is crucial to check that there is no existing trademarked business name when choosing your business name. We recommend checking both the Companies House register and the trademark database when deciding on a trading or business name.
3. Tax implications
By combining the finances of multiple businesses under a single company, you may trigger higher tax thresholds. This may include the requirement to register for VAT if your turnover exceeds £85,000 in any 12-month period. It may also lead to the payment of higher rates of corporation tax if your overall profit exceeds £50,000 during the financial year.
4. Business name considerations
When deciding on a name for your business, there are certain rules to which you must adhere under the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015. Specifically, the business name must not:
- Be the same or too similar to an existing trade mark
- Include the suffixes “limited”, “Ltd”, “limited liability partnership”, “LLP”, “public limited company”, or “plc”, and
- Include “sensitive” words or expressions unless you have permission – e.g. “association.”
Companies that use trading names must make it clear that they are trading under an alternative business name. For example, “Mega Building Limited trading as Mega Plumbing” or “Mega Plumbing is a trading name of Mega Building Limited”.
Risks of Business Overlap and Conflicts
Running several businesses under a single umbrella company increases the potential for conflict and overlap; examples include:
- Problems with cross-company departments which may affect all businesses
- Poor performance of one business which negatively affects other brands
- Reputational harm caused to one business may affect other brands, and
- Overlapping interests among directors
By being aware of this type of risk and putting in place effective mitigation measures at a company level, one can avoid harm caused by business overlap and conflict.
Weighing the Pros and Cons: Decision Time.
Running several businesses under a single company is not always the correct approach. Whether you should do so will depend on your business strategy, type, size, structure and financial performance, among many other factors. For example, if you have multiple businesses that are completely unrelated, share no operational management, and where there is a potential for conflict, running separate companies may be preferable. This may also be the case if you will need to pay more corporation tax under a single company.
If you are unsure whether running several businesses under a limited company suits your needs, speak to a company law and accounting specialist.
Tips for Successfully Running Multiple Businesses.
Running multiple businesses under a single company can be a complex undertaking but, with the right approach, it can be highly rewarding. To run multiple businesses successfully under a single company, we recommend that you:
- Carefully research your business name – When deciding on a business name, it is imperative that you carry out thorough research to ensure that you are not at risk of potential copyright infringement. Likewise, you may need to consider copyrighting your business name to provide protection from passing off by others.
- Look for synergies and shared resources across your businesses – This means identifying where your businesses can complement each other or share operational infrastructure, systems, and resources. This will achieve cost savings, economies of scale and improved operational efficiency.
- Delegate authority and empower leadership – Managing multiple businesses effectively will require you to delegate authority and empower capable leaders within each business. To this end, consider hiring experienced managers or promoting individuals with proven track records to take leadership roles. By placing trust in your leadership team and giving them the autonomy to make decisions you can foster innovation, agility and growth within each business.
Running several separate businesses under one company requires clear strategic thinking and effective management. By putting in place clear structures, leveraging synergies and empowering the leaders of tomorrow you will boost your chances of success.
Uniwide Formations is the premier UK company formation agency based in Central London. To make the incorporation of your company as easy as possible we offer a range of company formation packages to suit your needs. Our friendly company formation team will complete your company incorporation professionally and efficiently. We also provide expert support, advice, resources and tools to make your business journey as smooth as possible.