Company owners often think about setting up a second company, to keep a new venture separate from an existing business.

Often there are sound commercial reasons for using more than one company, including to:

• Limit liability
• Involve different shareholders
• Enable a stand-alone sale of the new businessFor example, someone who owns an ecommerce business and a restaurant chain may wish to keep them separate so that each company can be sold more easily in the future.Someone who owns a software company and a property rental business may wish to keep them in separate companies so that the ‘trading’ business (the software company) is not contaminated by the ‘non-trading’ business (the property rental business).

  Companies that own non-trading assets, like rental property, can lose important tax reliefs, including Entrepreneurs’ Relief, Holdover Relief and Business Property Relief.

  Business owners used to be punished for owning more than one company. This is no longer the case (since April 2015).

  What happened was the £300,000 small profit band (where the lower corporation tax rate was payable) had to be divided up among associated companies. For example, in the case of two companies, each company would start paying corporation tax at the higher rate when its profits exceeded £150,000 (instead of £300,000).

  The associated company rules prevented the profits of one business being artificially spread over more than one company to avoid the higher rates of corporation tax.

  The associated company rules have become largely redundant with the                    introduction of a single flat rate of corporation tax for all companies, currently 19%. You are no longer penalised for owning more than one company – they all pay corporation tax at the same rate.