I recently posted a video on YouTube explaining the importance of using the correct SIC code when starting a company. There are many of you that are losing thousands of pounds and months and months of wasted time messing around because you're getting caught out by putting the wrong SIC code on your company registration form.
If you choose the wrong SIC codes when starting your business, you might end up having to spend a lot more on regulatory compliance than you strictly need to. I highly recommend watching the full video (above) until the end as it contains important information which could save you a lot of time and money. In this article, I explain the importance of picking the right SIC code and which ones I use for my businesses.
What Are SIC Codes?
Firstly, what is a SIC code? A SIC code stands for a Standard Industrial Classification of Economic Activities. What does that mean? That means Companies House, the government, they want to know what your business is doing. They want to know the classification of the business. So when you set up your company on Companies House, they ask “What's the SIC code?”. They will give you a list. And you'll scroll through pages and pages of different SIC codes with different businesses, and most people scroll through, and they just choose the one that seems most appropriate.
So, there are all these different SIC codes, and you might think, “It's much of a muchness. Who cares? I'll just choose one.” No, this is where people are getting absolutely busted.
Rent2Rent SIC Codes
When you're doing rent to rent, the question is, what are you? Are you a management company managing the property for the landlord? In which case, if you're a management company, then you should go under 68320, which is for the management of real estate on a fee or contract basis.
But here's the problem with that. The way that we do rent to rent and the way that I teach my students to do rent to rent, we are not a management company. If you're a management company, then suddenly you are restricted by management rules. You now need to be registered with anti-money laundering before you can start trading. You now need to be registered with a redress scheme. You now need insurances. All these different things because you've put yourself down as a management company.
If you are doing rent to rent the way we teach it, you are not a management company and don’t have to do all those things. You can therefore use 68209 which is for the letting and operating of own or leased real estate.
Deal Sourcing SIC Codes
If you're a deal sourcer, you might just think, “Okay, I'm a deal sourcer. I'll use SIC code 68310, which says real estate agencies.” Same problem. If you are a real estate agency, you need anti-money laundering, you need this, this, this. You're now an estate agent.
The way that I do deal sourcing, I'm not an estate agent. When I do deal sourcing, I work with estate agents, and I'll negotiate on behalf of the investor. I'm offering business services and support to my investor. So when I set up my deal sourcing company, I'm using the SIC code 82990, which is other business support. My investors are buying these properties as a business investment, and I am offering support and services to help negotiate a good price and connect them to the agent. I therefore can skip a lot of the compliance steps that an estate agent needs to complete.
If you want to learn more about how to build up a property portfolio from scratch, set up a company and get deals then come and join me at the Property Investors Crash Course. It all starts at the crash course. Tickets are £1. You can get yours here.