Tax implications

[mr_broadband]

Hi all,

Starting a business - just myself working it but my sister is
investing a sum of money and taking a cut of the profits.

Do you recommend partnership or ltd company...

I am already self employed but my sister is employed...
What steps should she take regarding tax?

Cheers,

Tony

 

[james constant FCCA]

Hi

as you both have other income (and therefore utilising your free tax allowances against the other income), it might be better to trade through a limited company. That will enable you to not pay any income tax on any profits you withdraw from the company (depending on your profit extraction method). Another tax advantage is lower income tax rates enjoyed by ltd cos (compared to individuals) and also profits will esape NI 8%.

Equally, there are also pitfalls as well which you need to be aware of.

But, bear in mind that there is no such thing as a universally applied to all tax solution, it all depends on one's personal and business circumstances and it pays to take proper advice from a qualified and competent accountant as tax planning errors are usually costly and cannot always be reversed at no cost.

Good luck

 

[MarkD]

I agree with James advice, your accountant will be able to help you decide whats right for you.

 

[MikeH]

If you go for a partnership, make sure that there are some agreements drawn up.

If you go LTD get the share capital set up so that ownership is seperate from profit payments. This way you can maintain ownership whilst your sister gets profit payments that reflect her investment.

These are just a couple of points to consider.

Mike.

 

[mr_broadband]

Thanks for all your advice...

Tony

 

[autolycus]

I am already self employed but my sister is employed...
What steps should she take regarding tax?

If you go for an option that means your sister will also become self-employed (i.e. you go for a partnership) then she will need to tell the Revenue within three months of the end of the month when the self-employment begins. For example, if she became self-employed on 15 March, she would need to inform them by end of June.

Failure to do so can result in a £100 fine.

Dave.