Sole Trade -v- Limited Company

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

  1. SoFar

    SoFar UKBF Newcomer Free Member

    24 0
    Although not all the details are out yet, it's looking like there will be cuts in corporation tax from the con-libs. With that said, if I have been putting off changing from sole trader to ltd, the tax savings are more likely to increase than decrease in the next few years aren't they?

    I know this is a question I should be able to answer myself, but I'm tired. :)
    Posted: May 19, 2010 By: SoFar Member since: Feb 25, 2007
  2. elainec100@cheapaccounting

    [email protected] UKBF Newcomer Full Member

    13,268 2,883

    They are talking about a cut in Corporation tax paid by companies with profits over £300k - so it may not concern you.
    Posted: May 20, 2010 By: [email protected] Member since: Nov 4, 2005
  3. linda nicholson

    linda nicholson UKBF Newcomer Free Member

    1 0
    i am a bookkeeper is there any software package i can use for doing directors reports balance sheets /audit reports for companies house thought i had done 3 rd time they have come back cleint does not want to send to accountant cannot afford one yet
    Posted: Jun 11, 2010 By: linda nicholson Member since: Jun 11, 2010
  4. marshrobin1

    marshrobin1 UKBF Newcomer Free Member

    1 0
    Thank you for a very useful summary of this question.:)
    Posted: Jul 10, 2010 By: marshrobin1 Member since: Jul 9, 2010
  5. mat@msg

    [email protected] UKBF Regular Free Member

    170 20
    Posted: Sep 6, 2010 By: [email protected] Member since: Nov 16, 2009
  6. bsmith

    bsmith UKBF Newcomer Free Member

    1 0
    The post is informative and useful.At some stage during your business career the question that most of us have to deal with is whether or not to form a limited company.
    Posted: Sep 7, 2010 By: bsmith Member since: Sep 7, 2010
  7. Tax Specialist

    Tax Specialist UKBF Newcomer Free Member

    12 1

    I would just add that the limited company option might be attractive for reasons of not exposing one's assets to a possible claim. That is one reason (Quite apart from tax considerations) why many high-risk businesses trade via a Ltd Company. Remember, too, with a limited company your business financial data will be in the PUBLIC DOMAIN and thus easily accessable by competitors !

    I strongly recommend you take expert advice on this before proceeding.
    The money you spend on that will be very worthwhile, since you need to
    fully understand the different choices.

    Best wishes

    Tax Specialist
    Posted: Sep 8, 2010 By: Tax Specialist Member since: Sep 8, 2010
  8. elainec100@cheapaccounting

    [email protected] UKBF Newcomer Full Member

    13,268 2,883
    Limited info available - abbreviated accounts plus details of reg office, directors etc
    Posted: Sep 9, 2010 By: [email protected] Member since: Nov 4, 2005
  9. safetyjunction

    safetyjunction UKBF Newcomer Free Member

    6 1
    Hi there,

    I've been on the forum before with a previous supplier but now as my own new company.

    I have been reading all of the comments here and all have valid points. However one comment near the start of the thread has been completely overlooked and that is one of perception.

    Perception is important when trying to attract new suppliers and customers and my business will be predominatly web based. Being a sole trader in these circumstances limits conversion sales as many people like to see they are dealing with a 'perceived' larger business.

    I've also experienced caution from suppliers who almost look at many sole traders (Rightly or wrongly) as scam artists. I'm sure people are just over cautious these days but I found it very interesting.

    I have gone the Ltd route because I am looking at the bigger picture and aiming for fairly quick growth. Due to the amount of products I need to deal with and large volume of transactions I find it more useful to manage the liability through the Ltd route.

    I think it depends on products or services you provide. Remember if you do provide products where there can be any issues in terms of distance selling, or any regulations where the business can be taken to court, fined etc then I would prefer the protection of going through the business.

    Just my 2 pence worth, hope it helps as people seem to be just focussing on the amount of work the paperwork takes or tax. Surely the overall business model should be the main driver as in my case? All thoughts and opinions welcome :)
    Posted: Sep 13, 2010 By: safetyjunction Member since: Sep 13, 2010
  10. 90DC

    90DC UKBF Newcomer Free Member

    791 152
    I chose to go into business as a sole trader and although it might be worthwhile going Limited, i wouldn't be happy in making that decision until i am atleast three years into business. I want to make a name for myself and not show my competitiors my finances until i am one of the leading companies in my area. I'd like to think i will keep the tax man happy in the meantime.
    Posted: Sep 14, 2010 By: 90DC Member since: Jun 6, 2010
  11. Pdsayers

    Pdsayers UKBF Newcomer Free Member

    3 0
    Great post and many great replies.

    I think Sole trader is still the way to go for me but everyone's situation is different.

    The limited liabillity is a bonus but I have always thought this could be abused by high risk business (aka fraudsters) leaving behind creditors when they go under.

    So glad I joined this Forum!
    Posted: Sep 15, 2010 By: Pdsayers Member since: Sep 14, 2010
  12. mat@msg

    [email protected] UKBF Regular Free Member

    170 20
    Posted: Oct 4, 2010 By: [email protected] Member since: Nov 16, 2009
  13. Merlion ABS

    Merlion ABS UKBF Newcomer Free Member

    66 11
    Nice simple little app. however, I think there could be a little problem with it.

    when you first enter the net profits, it then goes to the comparison screen showing tax and ni due for both sole trader and ltd co and also states the savings gained by going ltd.

    But the problem i encountered is that if you then enter a revised net profit at the top and recalculate, it still shows the tax and ni due etc.. for sole trader from the first go, yet shows the new calculated figures for the ltd company.

    This therefore gives incorrect figures!!
    Posted: Oct 4, 2010 By: Merlion ABS Member since: Apr 8, 2010
  14. mat@msg

    [email protected] UKBF Regular Free Member

    170 20
    Thanks for the feedback. I've let the IT team know!
    Posted: Oct 4, 2010 By: [email protected] Member since: Nov 16, 2009
  15. ukconstructionguru

    ukconstructionguru UKBF Contributor Free Member

    80 2
    Fantastic array of posts here, really helpful. For anybody that's looking for the main points in going limited I'd focus on:

    1. Limitation of Liability

    2. Different Remuneration (As above)

    3. Increased administration cost / burden / time consumption

    4. If you VAT register it is the entity that is VAT registered, not the individual. Providing the activity is not the same / very similar any other businesses ran as a sole trader will not be aggregated with the limited company (for VAT purposes).

    This is a particularly tough topic for anybody and requires considerable thought; I'm a chartered accountant by trade but now in entirely different industy. I still had to rely on Elaine a month or so ago for some advice (thanks again Elaine!) - no decision should be made lightly and all angles should be considered.

    Last edited: Oct 4, 2010
    Posted: Oct 4, 2010 By: ukconstructionguru Member since: Sep 10, 2010
  16. braddo

    braddo UKBF Regular Free Member

    299 22
    Super informative thread. I haven't read all of it, but will.

    I am NOT in business yet. I am about to launch a new product onto the market (within the next 2-3 months). Inititally, it will be a "trial". The product is unproven. It may sell. It may flop.

    If it sells well, the business will be profitable within 3 months, as overheads are minimal and I'm aiming to distribute through large retailers, quite possibly on an "sale or return" basis.

    This is what I'm thinking of doing with regard to ST vs LTD company:

    I want to set up as a VAT registered Sole Trader for the trial period. Therefore when I purchase my stock, I'll be a sole trader.

    My question is this:

    If the product is selling well in the shops, I will most likely incorporate a LTD company, as I will need to buy a van, and start doing a lot of travel, and probably rent storage premises. If I incorporate as a LTD company after say 2 months (BEFORE the retailers pay me for the goods that have sold), and the retailers then pay my LTD company - am I still entitled to the tax benefits of the LTD company on that income?
    Posted: Oct 21, 2010 By: braddo Member since: Oct 9, 2010
  17. great thread very usefull
    Posted: Oct 28, 2010 By: socialenterprisesearch Member since: Oct 28, 2010
  18. algin8

    algin8 UKBF Newcomer Free Member

    8 1
    just joined in
    this post makes a good reading for every1
    Posted: Nov 12, 2010 By: algin8 Member since: Nov 12, 2010
  19. Alan R Price

    Alan R Price UKBF Newcomer Free Member

    2,123 1,037
    My advice to any person starting a new business, if it is going to involve using any significant amount of credit, is to use the protection of limited liability. There may be tax advantages to being a sole trader but in my view the protection from personal liability is far more important.
    Posted: Nov 15, 2010 By: Alan R Price Member since: Jul 5, 2010
  20. frauke

    frauke UKBF Regular Free Member

    398 52
    Generally I'm a great believer in the advantages of Ltd company over sole trader - but there is one group who never, never, never should consider becoming a Ltd Company...

    They are individuals who cannot ask for receipts and cannot keep records of any kind. They are difficult enough to deal with as a sole trader, but as a Ltd company impossible!
    Posted: Nov 16, 2010 By: frauke Member since: Jul 13, 2007