Your risk instinct is exactly right, and it is the main reason most accountants would steer you towards a separate company rather than a subsidiary. Here is how the two compare. Risk and ring-fencing: a separate company owned by you personally gives the cleanest separation. If the new venture fails, its debts stay in its own company and your existing business is untouched. A subsidiary also has its own legal personality, so it does ring-fence the parent company - but the links are closer: the parent may be asked for guarantees, and a failed subsidiary still damages the parent's reputation and accounts. A subsidiary of a small private company is usually a holding-company structure that adds complexity without much benefit unless you have a specific reason for it. Tax: a subsidiary in a group can surrender losses to the parent through group relief, and companies in a group can sometimes move assets between each other without an immediate tax charge. That sounds attractive, but it only helps if the subsidiary makes losses the parent can actually use, and the group relationship rules have to be maintained precisely. A standalone company simply gets its own corporation tax position, its own allowances and its own losses to carry forward - much simpler. Admin and cost: this is where the separate company usually wins. Two companies means two sets of accounts, two confirmation statements and two tax returns either way - but a group structure adds group accounts, intercompany accounting and extra disclosure. More accountant time, more fees, more room for error. When each suits: a subsidiary makes sense when the new venture shares staff, premises, branding or funding with the existing business and you want to keep them linked. A completely separate company suits your situation - a totally different business where you want maximum protection for the existing one. One extra thought: if you ever wanted to sell one business and keep the other, a standalone company is far easier to sell.
