- December 8, 2016 at 11:53 am #164229
I’m sure I will need to speak to an accountant to confirm your advice but would appreciate your thoughts nonetheless, i’ll try to keep it brief.
Next year intending to start up but unsure on whether to go sole trader or LTD. I will be starting the business part time (evenings and weekends). However I currently pay higher rate tax in my full time job so my understanding is all profits would be taxed at 40%.
Would there be any advantages to going LTD company? I can only see myself making £500 to £1000 a month turnover. Would prefer LTD as I think it looks more professional but don’t want the hassle if there’s no financial benefit.
Thank you!December 8, 2016 at 3:56 pm #164244
I can’t advise you based on experience but Startups does have a digestible guide that demonstrates the advantages and disadvantages of a limited and sole trader business structure.
Hopefully it helps you make the decision!
Hello there, I am a staff member at Startups.co.uk. Startups.co.ukFebruary 8, 2017 at 2:04 pm #166612
If you have a limited company you are likely to pay an accountant something in the region of £800 – £1,000 every year for preparation and filing of accounts so that needs to be factored into your decision
Ian Johnston - Factoring Solutions --- Independent Factoring Broker for growing SMEs --- Discover my free factoring negotiation service that tailors solutions and protects your UK business. --- Call me today on 01827 707 680February 26, 2017 at 10:26 pm #167819
I’m not an expert, but my accountant did tell me to start as a Sole Trader, because a LTD company has to declare full accounts and it’s extra cost and work. I’d definitely recommend getting advice from an accountant, though, no matter what advice you receive on here. The fact you pay higher rate tax in your full-time job could very well affect things.
Freelance logo and brand Identity designer from the UK. I create beautiful, functional and effective logos and brand identities for businesses and entrepreneurs worldwide. www.logopositive.com | email@example.comJuly 24, 2017 at 7:25 pm #173052
One of the First decisions you need to make in your business venture is what type of company are you going to have.
I will be going through all the details for the three main types of companies.
While most sole trading businesses are one man/woman bands, they make up a huge part of the service sectors, you can also employ staff still registered as a sole trader.
As a sole trader, the decisions you make are instant and you will not have to waste time trying to get other directors to see your point of view while your competitors are already changing the market and closing the sales that you should be making!
All Money made will be yours to do as you please (After tax!!)
The Advantages of Being a Sole Trader:
If you don’t plan on employing anyone to work for you, then a Sole Trader is probably best for you.
1. There is no cost to register
2. You can order your business cards immediately
3. Very little red tape
4. Most start ups are registered as sole traders
5. Expenses such as business travel and some costs of your premises (even if you have a home office) are tax-deductible
The Disadvantages of Being Sole Trader:
1. As a Sole Trader, you are the business and the business is you, This means any debt that cannot be paid by the company will have to be covered by your own personal wealth.
2. Being a Sole Trader means you are self-employed and your tax will be self-assessed register for self-assessment with HMRC…REMEMBER THIS!
If you are thinking about going into business with a friend than a partnership is the one for you. This is where two or more people pool skills, resources and money to build an enterprise where an agreement is made to share responsibility for profits and also the losses. Many domestic firms are either Sole Traders or Partnerships. A large amount often starts as a Sole Trading business and then register as a partnership to help grow.
The Advantages of Forming a Partnership:
1. Just as flexible as a Sole Trader
2. Benefit of having two or more heads
3. Business won’t collapse if one person wants to go on holiday
4. Liabilities, ownership and profits of the business are split
5. Each partner is registered as self-employed and puts in a separate tax return.
The Disadvantages of Forming a Partnership:
1. Liabilities, ownership and profits of the business are split
2. Each partner is registered as self-employed and puts in a separate tax return.
3. You also have the liability of debts incurred for those of ANY partner, pay particular care to the conduct your business partners.
Limited liability company (Ltd)
Incorporating means registering a limited company at Companies House, This will add weight to you and your company meaning more credibility to the business. If you are looking for a cash injection then you may find it easier to borrow money if you have a limited company.
Being a Managing Director of a limited company may bring that big title but it will also bring more work when submitting the year-end accounts.
Most Private limited companies are owned by shareholders and are limited by the shares. You can be the Sole Share holder and director and also act as the company secretary (There is no longer a legal requirement to have a company secretary).
The Advantages of Limited Liability Company (Ltd):
1. Can control the companies financial risk
2. More credible as a limited company
3. The business is completely separate to the personal finances of the directors (your family house and lifestyle are protected)
4. The tax regime is more favourable to a registered company than to a sole trader
The Disadvantages of Limited Liability Company (Ltd):
1. You have to submit full statutory accounts and a company tax return to HMRC each year
2. Pay Employees’ income tax and NICs
3. Before you start trading you need to officially register your limited company and choose the name of your businessJuly 28, 2017 at 3:46 pm #173244
I was advised by my current accountant when I was starting out. Although the accountancy charges are greater for a limited company than a sole trader, the decision on incorporation boils down to anticipated profits.
I was advised that profits need to be at least £15,000 or so to make it wothwhile; for the tax benefits.July 28, 2017 at 4:35 pm #173249
I was advised that profits need to be at least £15,000 or so to make it wothwhile; for the tax benefits.
Rather dubious advice I would have thought as an income of £15,000 pa is barely above the threshold for tax anyway
Ian Johnston - Factoring Solutions --- Independent Factoring Broker for growing SMEs --- Discover my free factoring negotiation service that tailors solutions and protects your UK business. --- Call me today on 01827 707 680July 28, 2017 at 4:49 pm #173250
This figure was given to me while I was still working as an employee; and around 5 years ago. The threshold may be a little higher now, but would depend on the additional accountancy fees.