Recouping startup/investment costs

[Summit]

Hi all,

Considering setting up a small company making dog equipment/accessories.

From research and prototyping I’ve calculated the startup costs at around £13,000 primarily consisting of tooling and some component manufacture etc.

It will take time to get up and running, marketing and brand recognition, I’m not expecting to break even until 24-36+ months (profit totalling over 13k).

My question is around startup costs, the £13k would be from savings - if it was a ltd company I could loan the company the money and recoup it via director loan etc which would be pre-profit and not liable to corp tax/income tax however due to the slow nature of start up I’m wondering if ltd company is overkill and more effort than it’s worth (needing to do accounts etc) until I know the idea is going to be successful?

If i go the sole trader route would it be the case that I could deduct start up costs until paid back then start paying tax on profits?

Just a bit lost on the best route to go when start up costs are quite high.

another option is sole trader for 1-2 years.. then if it’s successful setup a ltd and buy the equipment from myself so I recoup that investment..

I’ve tried reading some of the gov guidance however it’s hard to find answers on the above info..

Any thoughts/guidance would be much appreciated.

Thanks

 

[Scalloway]

My question is around startup costs, the £13k would be from savings - if it was a ltd company I could loan the company the money and recoup it via director loan etc which would be pre-profit and not liable to corp tax/income tax however due to the slow nature of start up I’m wondering if ltd company is overkill and more effort than it’s worth (needing to do accounts etc) until I know the idea is going to be successful?

These costs if they were revenue then they would create a loss that could be carried forward and used against later profits. Any machinery purchased would be eligible capital allowances which would also reduce future taxable profits.

If i go the sole trader route would it be the case that I could deduct start up costs until paid back then start paying tax on profits?

Do you have other taxable income?

Have you spoken to an accounatnt yet?

 

[Summit]

Hi Scalloway,

thanks for the response.

I have a regular 9-5 which I would look to continue which takes me up to higher threshold.. perhaps puts weight behind setting up a ltd.

Not spoken to an accountant yet.

 

[Scalloway]

On the other hand starting off as self employed means that the losses could be set against your taxable income.