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Sole Trade -v- Limited Company

Discussion in 'Accounts & Finance' started by DFL, Mar 13, 2008.

  1. Scalloway

    Scalloway UKBF Legend Free Member

    13,106 2,830
    I would never recommend a partnership for a business. As a partner you are jointly and severally liable for the debts of the partnership. The worst case scenario is that your son runs up a huge debt and does a bunk leaving you to pay it off.

    So I would recommend a limited company for the restaurant and get a shareholders agreement drawn up by a solicitor.

    As for the social work business being a sole trader may well work. Just make sure you have all the necessary insurance.
     
    Posted: Mar 19, 2017 By: Scalloway Member since: Jun 6, 2010
  2. Steven Wood

    Steven Wood UKBF Newcomer Free Member

    2 0
    Scalloway.... Thankyou
     
    Posted: Mar 19, 2017 By: Steven Wood Member since: Mar 19, 2017
  3. DPM

    DPM UKBF Newcomer Free Member

    2 0
    Hi all.

    I am fairly new to doing my own accounts and have a query with tax.

    I am doing work for another company (being sub contracted out) and when receiving my first payment the company deducted 20% tax from my money. My question is, shouldn't they pay the full invoice amount I ask for and leave it to me to deal with my companies tax?
     
    Posted: May 1, 2017 By: DPM Member since: May 1, 2017
  4. educnews

    educnews UKBF Newcomer Free Member

    2 0
    Maybe not as important in Financial Services as Director guarantees mean that the legal protection afforded to directors in most other fields doesn't apply in FS, however having said that in accountancy terms as long as your accountant isn't charging a fortune because you've got "company accounts" the company route can save you quite a bit of money.
     
    Posted: May 7, 2017 By: educnews Member since: May 7, 2017
  5. Scalloway

    Scalloway UKBF Legend Free Member

    13,106 2,830
    Company accounts do cost more because they are a lot more complicated than sole trader accounts.
     
    Posted: May 7, 2017 By: Scalloway Member since: Jun 6, 2010
  6. Confusedly

    Confusedly UKBF Newcomer Free Member

    2 0
    G'day. I'm trying to do some rough calculations of how much to put away each month to cover Corporation Tax and Personal Tax (to be paid on dividends).

    There are two of us in the business who are 50% shareholders and directors. We both get 50% of the profits in dividends as well as a salary from the business (about £8000 to use personal allowance but still qualifying for state pension). Neither of us have any other income.

    Sorry about the incorrect terminology - I hope that makes sense!

    If we keep 20% of what comes into the business account each month aside, can that be used to pay the corporation tax and the personal tax on the dividends?

    I've done some rough calculations which seems to suggest that the numbers would add up. Am I right?

    edit: shucks, was going to post a link to an image of the numbers but can't until I have 30 posts! /a/WqicU

    If so, after the Corporation Tax has been paid, can any money that's left in the business account be taken out to be used for personal tax payments for the two people in the business?

    Hope this all makes sense! Thanks.
     
    Posted: May 24, 2017 By: Confusedly Member since: May 24, 2017
  7. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,506 851
    Money going on the bank account rarely reflect the company position.

    To declare a dividend, you will need to draw up management account and ensure that the dividends do not exceed the retained earnings.
     
    Posted: May 24, 2017 By: STDFR33 Member since: Aug 7, 2016
  8. Scalloway

    Scalloway UKBF Legend Free Member

    13,106 2,830
    Personal tax must be paid by the person receiving the income, not the company.
     
    Posted: May 24, 2017 By: Scalloway Member since: Jun 6, 2010
  9. Confusedly

    Confusedly UKBF Newcomer Free Member

    2 0
    Thanks. What if the money was taken out of the account, into a personal account, then used to pay the person tax?
     
    Posted: May 24, 2017 By: Confusedly Member since: May 24, 2017
  10. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,506 851
    It would go to your directors loan account. An overdrawn DLA can have tax consequences.
     
    Posted: May 24, 2017 By: STDFR33 Member since: Aug 7, 2016
  11. Samose123

    Samose123 UKBF Newcomer Free Member

    5 0
    Would you move off-shore to avoid tax if your annual income exceeds 1 million pounds? To British Virgin Islands for example.
     
    Posted: Jul 15, 2017 By: Samose123 Member since: Jul 13, 2017
  12. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,506 851
    It depends.

    Are you happy to physically move away?
     
    Posted: Jul 15, 2017 By: STDFR33 Member since: Aug 7, 2016
  13. mollie

    mollie UKBF Newcomer Free Member

    17 0
    Hi I wonder if I can get some opinions on this... Myself and my husband have a VAT limited company which has a gross turnover of over £150,000 .... (if i'm honest i don't understand the tax etc that goes with it) however we pay an accountants over £2500 a year so we leave it to them.

    This is my question...We earn the money, put our tax away and spend the rest on getting rid of our mortgage, going on holiday, sending kids to Uni and generally enjoying life....this however has resulted in us taking too many dividends year after year and ending up with not only a corporation tax bill but two large personal tax bills, my accountant dosent really say a lot about this which I need to address however my thoughts are that we would be better changing to a LLP where we take what money we earn without incurring extra costs, the liability isn't an issue we don't owe and never have owed a penny to anyone from the business -we pay as we go so its more of us wanting to take what we want and pay the tax & Nics at the end of the year.

    Would you all give me your opinions please ?? thanks in advance
     
    Posted: Oct 20, 2017 By: mollie Member since: May 22, 2009
  14. Scalloway

    Scalloway UKBF Legend Free Member

    13,106 2,830
    Changing to an LLP would mean that you would have just personal tax bills as you will be personally taxed on the LLP profits.
     
    Posted: Oct 21, 2017 By: Scalloway Member since: Jun 6, 2010
  15. Chart Accountancy

    Chart Accountancy UKBF Regular Full Member

    174 21
    The personal tax bill will be much higher than the overall tax paid in corporation tax and tax on the dividends if you transfer to LLP. Partnership is tax neutral so partners are assessed on their profit allocation each tax year, there is no retained profit in the LLP as you could have with the ltd which allow you to keep funds in the business and receive later. You can look at options to reduce your tax with the ltd, you should discuss with your accountant if there are any tax saving options, for example paying into a pension scheme if you are not doing so already could help in paying less tax..
     
    Posted: Oct 24, 2017 By: Chart Accountancy Member since: Apr 18, 2017
  16. yuzi87

    yuzi87 UKBF Contributor Free Member

    72 7
    I would get a new accountant, my company turned over £250,000 I had 0 books no ledgers etc I just dumped my years paperwork and receipts at a well established accountants and it all got sorted for £800+vat secondly I would not want an accountant working for me who "doesn't say a lot"
     
    Posted: Nov 21, 2017 By: yuzi87 Member since: Jan 6, 2010
  17. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,506 851
    A good accountant will work with you, not for you.
     
    Posted: Nov 21, 2017 By: STDFR33 Member since: Aug 7, 2016
  18. Scalloway

    Scalloway UKBF Legend Free Member

    13,106 2,830
    When did you register for payroll? I haven't seen that CD ROM in years!
     
    Posted: Nov 30, 2017 By: Scalloway Member since: Jun 6, 2010
  19. mymindmyright

    mymindmyright UKBF Newcomer Free Member

    7 0
    Just what I've been searching for :)
     
    Posted: Dec 15, 2017 By: mymindmyright Member since: Dec 9, 2017
  20. Taxed

    Taxed UKBF Contributor Free Member

    42 4
    I'm starting to wonder if I might be better off not having a LTD company and being self employed?

    My main worry is the lower income on paper, for helping me with things like renting a house, or getting a mortgage.

    I think I pay less tax with a LTD company but my personal income looks lower (due to LTD company paying corp. tax and expenses). Is this a reasonable concern?

    Say the turnover for the year was £50,000.
    £10,000 of expenses (bank fees, accountant, working from home, including £5,000 of sub-contractor costs)
    Then about £5,000 of corporation tax.

    That leaves £35,000 of money for me, with £8,000 of salary and £27,000 dividends.

    So if wanted to rent or buy a house, I assume I could show an income of £35,000.

    However, if I was self employed, could I show an income of £40,000 to the estate agents (for renting) (as I could include the £5,000 I didn't pay in corp tax.

    Plus I'd have less expenses as accountant fees would be lower. And maybe I couldn't claim for things like use of home.

    Am I right in thinking if I was self employed, income given for this purpose (mortage or renting) would be pre-tax, rather than after tax?

    I probably pay less tax with a LTD company, but on paper I earn less which will/might cause problems with housing?

    Or would an estate agent/mortgage person look at the pre-tax earnings of the LTD company?

    Any thoughts or advice on this much appreciated. Thanks.
     
    Posted: Jan 25, 2018 By: Taxed Member since: Nov 4, 2016