Becoming a limited company

[LisaV]

I'm currently a sole trader but have been told that I ought to become a limited company as it has more advantages, esp if I'm looking to get a mortgage.

Could anyone tell me what the advantages are and how I can start the process? I don't sell any goods so VAT isn't an issue.

 

[Philip Hoyle]

The "sticky" at the top of the accounts sub-forum should cover your basics.

 

[Ernest Andy]

1 If you make more than £60000 profit you pay less tax as a ltd company.(I think that's the correct number)

2 If things go wrong, it is the company that has the debt, gets sued etc. rather than you personally.

 

[GRDCredit]

Lisa

I am not a bean counter so not going to try to give you advice but have you spoken to an accountant?

There are advantages (e.g. possible tax savings) and disadvantages (e.g increased administration) to being limited and I imagine that what is right for you is dependant on many different things

I see you are in Chippenham - PM if you would like an introduction to an accountant who I am sure will have an intial chat with you for free.

 

[Astaroth]

Most accountants give a free 30minute consultation and can help run through things like this.

Not sure about your references to products & VAT though.... whilst there are VAT exempt services etc VAT is not limited just to physical products

 

[David Griffiths]

1 If you make more than £60000 profit you pay less tax as a ltd company.(I think that's the correct number).

There can be tax savings from operating via a limited company on income as low as £15,000

 

[Ernest Andy]

There can be tax savings from operating via a limited company on income as low as £15,000

Really? Wow I didn't realise it was such a low threshold. Thanks for the info.

 

[chief07]

I have to agree with Ernest Andy, I think the major beniefit here is that of liability, especially if you're going to get a mortgage. If the company goes down, no assets such as your house would be involved.

 

[LisaV]

Thank you. My reference to VAT was because on googling limited companies there seemed to be a lot of information on VAT on goods. I don't sell goods but I offer a copywriting service.

At the moment I sort out my own tax, no probs there. The only reason I am thinking it may benefit me is because of what Ernest Andy said, if things go wrong it is the company that has the debt rather than me. Therefore if I am looking to get a mortgage, this may go in my favour. Whereas trying to get a mortgage whilst self-employed may be very tricky.

What admin would there be for me? Could I manage it myself?

 

[elaine@cheapaccounting]

Getting a mortgage as a director of a limited company can be just as tricky. To be honest a few lenders have a real difficulty understanding a director of a limited company!

 

[LisaV]

Getting a mortgage as a director of a limited company can be just as tricky. To be honest a few lenders have a real difficulty understanding a director of a limited company!

Yes that may be true, but it's a slightly better chance when the risks are explained. Whereas as a sole trader, if my work dries up then my house may be taken as payment of any debt incurred.

All the banks are really interested in is how much of a risk you pose. The director of a limited company poses a much lower risk than a sole trader.

 

[mat@msg]

I've posted this elsewhere but you may find it handy:

http://www.companiesmadesimple.com/sole-trader-v-limited-company.html

 

[hendyphilhendy]

Hi Lisa,

I gather Geoff has passed my contact details on - feel free to check out my website which has a handy, but basic, calculator to check how much tax you might save.

I look forward to hearing from you.

 

[LisaV]

Hi Lisa,

I gather Geoff has passed my contact details on - feel free to check out my website which has a handy, but basic, calculator to check how much tax you might save.

I look forward to hearing from you.

Cheers Phil, have left a message with your office. Really not sure if I earn enough for it to justify the admin charges however, but we'll see.

 

[elaine@cheapaccounting]

Yes that may be true, but it's a slightly better chance when the risks are explained. Whereas as a sole trader, if my work dries up then my house may be taken as payment of any debt incurred.

All the banks are really interested in is how much of a risk you pose. The director of a limited company poses a much lower risk than a sole trader.

Sorry Lisa - a tad confused.

If you are talking about a mortgage then the house would be at risk if you default.

Dents of the company remain within the company unless you have a directors guarantee but did I read the post wrong ..

I thought you was asking about getting a mortgage?

 

[LisaV]

Yes I don't have a mortgage yet and I've been told that as a limited company I would pose a lesser risk to a bank than as someone who is self employed, so they are more likely to consider me for a mortgage.

I may be wrong, I've just been asking around and don't really understand much of this myself!

 

[GRDCredit]

Hi Lisa,

I gather Geoff has passed my contact details on - feel free to check out my website which has a handy, but basic, calculator to check how much tax you might save.

I look forward to hearing from you.

You will be pleased to hear I let Lisa have your You Tube link as well (hopefully she will still phone!)

 

[hendyphilhendy]

You will be pleased to hear I let Lisa have your You Tube link as well (hopefully she will still phone!)

You'll be please to know she did phone and we had a good chat. Despite my daughter falling off a step in the background - how unprofessional, but hey, I'm a real person and thats how I roll!

 

[QuickHomeBuyers]

Yes I don't have a mortgage yet and I've been told that as a limited company I would pose a lesser risk to a bank than as someone who is self employed, so they are more likely to consider me for a mortgage.

I may be wrong, I've just been asking around and don't really understand much of this myself!

Majority directors of a small Ltd are on a £110 a week wage which may not impress your lender. If you do declare dividends then you may have to have atleast 2/3 years accounts before they touch you in todays market.

There are ways around but you need to be a bit more specific with your firgures and time scale.