Sole trader starting an LLC, how does tax work?

[sirblt]

Hi,

I’ve been a sole trader for a few years now, do my own tax returns as they’re simple enough.

However, I’m looking into creating an LLC as I need a separate entity for Adsense. I’m definitely going to need an accountant for this but I do have a question I’m struggling to understand..

My idea is to have an LLC which will be a single member, meaning I can do ‘owners draw’ as and when I like I believe?

I’m a bit confused if I should run parts of my income through the business and what Im earning now as a sole trader (as I have been for all these years).

Let’s say I was to pay myself £20000 from the LLC to myself, would I include that in my year return to be taxed on or would that be taxed through LLC?

My biggest worry is on my records my income would be seen as low, as majority of money would be through the LLC? This would affect me getting finance for mortgage, cars etc.

I’m aware I’m very uneducated in this area, any advice is much appreciated.

 

[Newchodge]

Hi,

I’ve been a sole trader for a few years now, do my own tax returns as they’re simple enough.

However, I’m looking into creating an LLC as I need a separate entity for Adsense. I’m definitely going to need an accountant for this but I do have a question I’m struggling to understand..

My idea is to have an LLC which will be a single member, meaning I can do ‘owners draw’ as and when I like I believe?

I’m a bit confused if I should run parts of my income through the business and what Im earning now as a sole trader (as I have been for all these years).

Let’s say I was to pay myself £20000 from the LLC to myself, would I include that in my year return to be taxed on or would that be taxed through LLC?

My biggest worry is on my records my income would be seen as low, as majority of money would be through the LLC? This would affect me getting finance for mortgage, cars etc.

I’m aware I’m very uneducated in this area, any advice is much appreciated.

I thought an LLC was a US structure. Do you mean Ltd company?

I have never heard of owner's draw. It sounds like a US term.

If you are the sole shareholder of a Ltd company you and the company are completely separate legal entities. There are 2 ways you can withdraw money from the Ltd company - through salary as an employee ot the company or through dividends, based on the distributable profits available. The first is taxed at source by the company payroll, the second is declared by you via via self assessment.

 

[fisicx]

Why do you need a separate entity for Adsense? I’ve been using it for years as a private person (not even a sole trader). I have a limited company but Google doesn’t know it exists.

 

[sirblt]

I thought an LLC was a US structure. Do you mean Ltd company?

I have never heard of owner's draw. It sounds like a US term.

If you are the sole shareholder of a Ltd company you and the company are completely separate legal entities. There are 2 ways you can withdraw money from the Ltd company - through salary as an employee ot the company or through dividends, based on the distributable profits available. The first is taxed at source by the company payroll, the second is declared by you via via self assessment.

You’re correct, I’ve been researching US terms. Sorry for the confusion, it is indeed a Ltd company I’ll be looking to make.

 

[sirblt]

Why do you need a separate entity for Adsense? I’ve been using it for years as a private person (not even a sole trader). I have a limited company but Google doesn’t know it exists.

I had my Adsense disabled many years ago, as I’m sure you’re aware it’s very much a one strike and you’re out.

 

[fisicx]

Forming a limited company just so you run Adsense is daft. And it won’t work. Google knows who you are and will soon link the two together and ban you again.