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Discussion in 'Accounts & Finance' started by DFL, Mar 13, 2008.
No so. There can be tax savings on profits as low as £10k. Tax isn't the only consideration
I have started a Limited company and need some adivce. I have a business bank account and completed the registration with companies house. I need to submit a corporation tax return (in 2009). My questions are as follows:
1> I put my share capital as £100 (100 shares) = £1 per share with me as the director and owner (100%). I did not deposit this in the business bank account at incorporation. How do I rectify this - can I just deposit £100 now (several months since incorporation)?
2> All of my transactions do not include stock held (No stock held) as they were electronic. What categories do I need to place each transaction into? Can I devise my own categories, for example: Sales, Postage, Stationary etc..?
3> I have some bad debtors from a period of self employment (prior to incorporation) - can I sell these to the business (Disposal)?
4> I have only made about £2000's worth of transactions - can I submit online abbreviated accounts? I am not a qualified accountant but have had training in AAT and ACCA Part 1?
5> If I have added fun ds to the business at any stage how do I amend the share capital? (ie, IF I add another £200 to the business, from personal funds, as the director)?
This is just a part time project but i am sure you can agree that late charges need to be avoided. I dont feel as if I require an account at this stage as I have ceased trading for the meantime and just want to get the administration and accounting rectified before I go any further - I will appoint an agent as and when necessary. Any assistance would be helpfull and appreciated. All the best. P.
after working for a company for 19 yrs they have now become bankrupt,
and i am in the process of starting my own business.
For 2 months now I have been waying up what is the right way for me to go ST / LTD, and everywhere i look and hear it is you should go LTD,and another would say S T.
I would say this is 1 of my hardest decisions that i am going to take for quite sometime if not the hardest ,the company i worked for owed a lot back to the Tax & Vat man (in the 100ks) and was not a LTD.which is not the road i would go down. everyone i spoke to had said the same "what he wasn't LTD",
Being LTD would mean i would not make my family homeless if the worst would happen. but i feel that being LTD i would have to many forms to fill to much paperwork for me , and being at the moment a 1 man band S T would be a better option.
I thought that reading though this thread i might get a clearer view as to what way to turn , the only one who knows that is me this thread has helped out but it looks like I'm going to go to the next thread and read up on how to choose an accountant, and get more advise that will fit my needs and make my new venture go smoothly
for the record though i feel that being a Sole Trader would benefit me and my family more.
BTW thank you on all of you posts.
It is very useful to know this. I'm setting a company and wasn't sure about the type of company I should choose.
I am kind of stuck here. I really dont know if it is best to go down the limited company route or sole trader. My situation is that I am buying the lease of a town centre bar, however due to a drop in the price of the lease I found myself with a little spare so I am planning to use that to take over an off-licence, which was part of a chain who went bust. Now as I understand it if I have a company and the 2 businesses I will not qualify for small business rate relief. I also would like to expand if Ive made the funds to do so inn a couple of years. I ended up even more confused as when I was looking for an accountant and met with them some would say go ltd and some be a sole trader!
However for now, if one bloke owns a bar and a little offy, is it best to be a ltd company or sole trader? What do you guys think?
I can't understand why an accountant would tell you to go down the sole trader route in this situation. A town centre bar and an off-license could easily expose you to liability. I would say definitely the company route to protect you from liability if things went bad. Also if you will be having employees it also makes sense to form a company.
I'm sure one of the Accountants on here will beable to give you additional advise.
Well I have already set up a ltd company but as I am still in the transfer stage I just thought I would check if this was the smartest move before everything was made official. Besides on a less serios note Managing Director sounds better than landlord.
You have raised an important point which was overlooked. This thread has mainly been about the finacial aspects. People reading this should also consider laibility so many people will put the asset of thier business into a holding company then trade from another comopany, then should the worst happen ie you get sued or anything you can sipmly say sorry no money in this company, close it down and retrade under a diffrent name. Or at lease thats how it was stated to me.
A ltd company is the safer option, especially if you have assets. There may be many examples where finacially you stand to gain from being a sole trader however you have full liability in that situation.
Newbie here. I currently earn around £35k in my day job but, for one reason or another, have started doing some work outside of my job for a friend as a favour. This has mushroomed somewhat and I can earn expect to earn around £20k this year (£35k day job, £20k private). The problem is that the friends business will not authorise personal cheques due to Sarbanes-Oxley. As such I need to set up either a partnership (yes, there's another guy I'm working with) or a limited company. Having looked into the options it seems I'm going to get stung pretty heavily on the profits because of my day job. Which option is best for me and am I right in thinking that any profits I make when taken alongside my £35k salary will take me into 40% tax (ouch category)? Can I limit this at all?
You might want to put this as a new post in the forum.
I would suggest limited co and taking div might be best - you will pay CT on company profit and then you may have to pay additional income tax on divi once you have exceeded the £40k ish limited (£34800 plus personal allowance of £6k). These are rough figures and you are best getting advice to suit your circs.
I think it depends also on what kind of business you are setting up. If its just a simple business, gardener etc then it doesnt really matter, if you are setting up a business that needs more national customers, then I think a Limited company is better from a marketing perspective, I know its snobbish but unfortunately this is the case, it looks better.
Interiors for Homes Ltd
website - interiorsforhomes.co.uk
I had decided to operate as a sole trader this time round as I didn't want the paperwork involved with a company.
However, a meeting last month with my accountant persuaded me that I should incorporate. It is quite clear that the tax savings are still considerable even though they are not what they were a few years ago. I will save £3500 in tax this year on earnings of £35000 by paying myself a salary of just above the NI threshold and topping up with dividends.
On top of this I get the advantages of limited liability. No-one should under-estimate the importance of this as you just don't know what is round the corner. For instance an illness or accident which means you can't work can quickly lead to bankruptcy for a sole trader if there is a tax bill outstanding. If you operate as a company you can just fold it and walk away.
My accountant will do all the paperwork for me for £500 per year plus a box of cigars and a bottle of malt at Christmas!
Where does that figure come from?
Net earning after tax as a sole trader £26,633
Net pay and dividends after all taxes on a basic salary and dividends through a company £28,495.70. Saving £1,862.70.
Thanks, this is a great post.
That's what he told me. He must be a better accountant than you!
.....but I'd rather be with David when the taxman comes visiting!
Or have more gullible clients!
Joking aside, either your accountant is giving incorrect advice or it has been misinterpreted, you will not save £3.5k on a 35k salary.
Need to clarify that for any others reading this thread and making decisions based on same or similar profit levels.
wow, i've just waded through this thread and am even more confused than i was before, mainly because i realise that there is even more stuff i haven't a clue about than i thought!
like many others i am weighing up the employee / ltd co. / sole trader thing.
if i put some numbers to it all, can someone please tell me what is my best option??
i have the option of contracting via my own Ltd Co., and the amount i will make is small, say £12,500 (it's just part-time and i have no other income / jobs).
i have travel expenses of £3,500.
can these be "claimed back" (whatever that means - i just keep hearing it everywhere), and if so how much?
so my "net" BEFORE tax is only £9,000.
So what should i do?:|
thoughts much appreciated!
On the discussion between Spongebob & David : I wonder if the answer relates to the cash-flow advantage 1st time around. - S/Bobs Acct is quoted as this year
In broad terms : the company route saves £2.0k in terms of tax & ni as per David's post; But there is also a timing/cash-flow implication in not having to make payments on account.
Thus in the first year there are more cash flow benefits than the pure tax & ni savings but in subsequent years the overall saving will be around the 2k mark.
An extra benefit of the Ltd. Co. route is the ability to choose if, and when, ones tax rate goes above the basic rate. Sole traders & p/ships are taxed on all their profits whether they take it out or not. Owner/Directors can choose to pay tax at the Small Companies Rate and only draw it out as Divis in the tax years that best suit them. This smoothing effect on tax rates is a major benefit where business profits fluctuate.