Sorry to bump up the post, but Im surprised no one can answer any of the questions on this thread - I am sure I'm not the only person who has these types of questions.
We can answer them its just a very long answer and much has been covered in other threads.
To attempt to summarise
Advantages of a limited company
1) The liabilities of the company are limited to the assets held within the company so if it goes buust there is usually no comeback on the shareholders personal property (but see later)
2) There is still the (incorrect) belief that a company is more substantial than a sole trader/partnership and there are still companies that do not deal with sole traders (although becoming fewer).....plus not being registered for vat is a bit of a giveaway in most circumstances
3) They are currently more tax efficient if the profits are over £25k and under £300k by using a mixture of salaries and dividends, and profits can be retained in the company instead of passed to shareholders so personal tax can be manipulated.
4) It is easier to take on new investors in the company (by issuing shares)
5)It is also easier to sell a share in the company than a part of a partnership.
6) A company can create a floating charge over its assets in order to borrow more money (Usually limited to larger companies not startups)
7) As the company is a seperate legal entity the vat registration is with a single business.
Disadvantages
1) There are more admin and costs to running a limited company -
An annual return has to be filed at companies house
Accounts have to be produced in a set format and again filed which means that the general public have access to them (for a small fee).
Money belongs to the company not the individuals therefore to take money out of a company you have to pay a salary or dividends. If dividends then all neccessary procedures and paperwork need to be completed (Minutes of meeting, dividend vouchers etc)
Due to above accountants costs are higher.
2) Although liability is limited lenders will often insist that shareholders/directors give personal guarantees which will often negate much of the limited liability (The lender can still get the money from you personally)
3) It is more difficult to close a limited company than sole trader.
If I registered as a limited company what would the total cost be - and what would the costs be?
Costs would be
Cost to form the company anything from £35 if you do it yourself to around £250 if you get someone to do it (includes producing minutes, share certificates, vat and PAYE registration, certificate of incorporation, bound memorandum and articles, assist in opening bank account)
Annual return £15 pa if filed online or £30 if filed by paper.
Accountants costs depends on size of company and nature of trading etc say for a small company around £550.
Would I have to employ an accountant?
Quite probably unless you can produce accounts in stautory format and complete a corporation tax return.
Would I have to employ a solicitor?
Not neccessarily if you are the sole shareholder. If there are other shareholders it may be advisable to get a solicitor/accountant to draw up a shareholders agreement.
What are the disadvantages of running a business as a soletrader?
Mainly the opposite of what is covered in advantages of a limited company.
unlimited liability (you/partners are personally liable for all debts)
lack of flexibility in admitting other investors
VAT registration is for a sole trader personally so you could not have two businesses as a sole trader, one of which is vat registered whilst the other is not.
If I registered on top of income tax and national insurance, what else would I have to factor into my accounts?
A company pays corporation tax on its profits (currently 19% at the lowest level).
If it pays a salary or gives benefits in kind to its employees/directors then it pays employers NI at 12.8%.
The employees will pay tax/NI personally which would be deducted by the company and paid over monthly/quarterly)
Hope that answers your question but if I've missed anything then please do not hesitate to ask (Or any other accountants feel free to add)
