Question about starting a Ltd Company and Benefits

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willowd

Hello there, I have joined here to ask a question on behalf of my friend who is very talented and would like to make an income from her art and music.

She has ASD APD dyslexia dyspraxia sensory disorder ADD fibromyalgia and FND and is in her early 50s. She has a son to whom she is a single parent, he is 20 and is in university; her son has ASD APD and hyper mobility.

My friend receives the ESA (the one where she doesn't need to attend groups for work), PIP and housing benefit. Her son receives PIP.

My friend has potential to make a lot of money because she is so talented but obviously when starting out self employed cash flow is not always consistent and her big fear is that it will impact and stop her benefits payments before she is ready.

We need advice about whether being listed as a director of a company limited by guarantee (eg social enterprise) would impact her benefits even if she were not drawing from the company yet?

What would happen if her son and I formed a Ltd company to receive her income but no drawings were made until enough had amassed to give her the security to leave benefits, is that legit?

I called the Scope hotline and they gave me a number for a charity in her local area to call but the number didn't work.

My friend also wanted me to find out if she can get a PA to help with day to day personal admin like bills?

She also wanted to know if her son should be on the tenancy now he is 20 and no longer a child? 

Would his PIP be affected by starting a business as a student? 

I would be very grateful for any experience, advice, anything from folks who know about setting up either or both Ltd companies and / or social enterprises while on benefits?

Thank you so much

chiarieds

@willowd - & welcome to the community. About a limited by guarantee company from the government's website, which can be seen here: https://www.gov.uk/limited-company-formation

Limited by guarantee companies are usually ‘not for profit’. This means the company:

• is legally separate from the people who run it
• has separate finances from your personal ones
• has guarantors and a ‘guaranteed amount’
• invests profits it makes back into the company

This doesn't sound like the business model you're proposing, where you feel your friend hopes to make & keep any profit. I would imagine she would rather set up as a sole trader. Seeking the advice of an accountant may explain her options.

I don't think yourself & son setting up an ordinary Limited company to keep her profits will work either, as this could be seen as deprivation of capital (or income) in order to receive ESA. Please see: https://www.gardencourtchambers.co.uk/news/social-welfare-updates/the-deprivation-of-capital-rule-in-welfare-benefits

Your friend would need to contact the DWP if starting any work. There's an explanation here, as well as a link to the PW1 form that would need to be completed: https://www.gov.uk/government/publications/employment-and-support-allowance-permitted-work-form/permitted-work-factsheet

Her ESA would continue if she worked less than 16 hours a week, or earned less than £143 a week. Please see: https://www.gov.uk/employment-support-allowance/working-while-you-claim

As mentioned above, her PIP would continue, as it's not means tested. PIP would however be considered income as far as tax purposes go.

I hope this has answered some of your questions.