Transitioning from sole-trader to Ltd - good idea?

[Nacha]

I'm considering transitioning my sole-trader business into a Ltd company for the benefits of both limited liability and lower rate of tax (I'm paying a lot at 40% right now).

I currently complete all my accounts, VAT returns, SA returns myself with ease. I like that simplicity too, hence my question is; what extra hassles would I encounter by turing my business into a Ltd company?

Thanks

 

[john1989]

You would need to submit accounts and an Annual Return to Companies House. You would need to file accounts and corporation tax returns to HMRC.
You would also have to complete a Self Assessment Tax Return for yourself.

You will almost certainly need the services of an accountant if trading as a limited company.

Have you crunched the numbers to see how much better off you would be as a limited company? Have you taken into account the upcoming dividend changes?

 

[Nacha]

Thanks for the reply John.

Yes as I was reading up about the 2016 dividend changes, however I would still stand to benefit as far as I have quickly calculated, but I would make sure to do a proper calculation before making the transition.

Yes as you stated; an accountant would be mandatory for a Ltd in my eyes.

My business is very simple I input all my sales and purchases in KashFlow, so all the financial accounts/reporting are pre-prepared in KashFlow too.

Roughly how much would I be looking to pay annually for an accountant to check and submit my accounts to companies house? And would there be any other additional costs of being a Ltd besides the annual accountant fee and the initial registration fee.

Thanks for you help thus far.

 

[john1989]

£1200 per annum is probably average.
@kevin.doran and @MyAccountantOnline are both respected members of UK Business Forums. Perhaps contact one of them for a quote?

You would also have the fee for the annual return filing which is £13 per annum.

 

[Ola1]

An accountant is not actually legally or otherwise mandatory until you cross certain company law mandated thresholds, or enter certain trades, or get told by an interested third party to get one.

However, we are here to provide services to businesses and individuals at any level,
who want their business books handled by a professional.

 

[Energise Accounting]

Accountants normally work out their fees based on turnover, sometimes it is best to use a accountant who specialises in a certain area for example contractors

 

[Bob]

Accountants normally work out their fees based on turnover

Not sure that that is the case. Maybe the pub trade that you deal with is different?

 

[UK Contractor Accountant]

what extra hassles would I encounter by turing my business into a Ltd company?

Would need to consider transfer of assets to LTD company - at market value or tax written down value?

Need to set up and run a hmrc payroll scheme if you want to keep your NI history going.

 

[Energise Accounting]

Not sure that that is the case. Maybe the pub trade that you deal with is different?

The pub trade is a fixed fee per pub depending on which services you require however, if you decide to trade as a sole trader, partnership or Ltd company the price is the same.

Most landlords expect their accountants to have a excellent understanding of the trade it is not all about crunching the numbers as any accountant can do that. I once took the accounts for a quite busy pub and the manager had been stealing about £35,000 PA the accountant did not have a clue

 

[Bob]

however, if you decide to trade as a sole trader, partnership or Ltd company the price is the same.

That's quite surprising. Everyone else seems to charge more for the extra work involved with a limited company

 

[UK Contractor Accountant]

That's not how we operate with PH - limited companies would always be quoted higher than sole traders or partnership due to the additional work involved.

 

[john1989]

@Energise Accounting that's unusual given the added complexities and submissions of a limited company.
Are you cheap for limited companies or expensive for sole traders and partnerships?

 

[Nacha]

Thanks for the info, much appreciated.

I would most likely get an accountant to do the submissions and payroll administrations as the poster above mentioned.

I currently run my business from my home however I would ideally prefer not to have my home address published on the company accounts. Am I right in thinking that it is perfectly acceptable to use the accountancy firm's address as the company office address as opposed to my own home address?

 

[Jeremiah@RHJ Accountants]

Most accountants offer a registered office service so the answer is yes.

Limited companies will always cost more than sole traders or partnerships due to the nature of extra work involved.

 

[Energise Accounting]

I mainly do work for partnerships and a couple of small Ltd companies my fees would be considered at the high end for partnership accounts however, they would be considered the norm for pubs.

Most Pubco agreements prevent licensees or make it not worth their while for licensees to run as a ltd company.

 

[Nacha]

So generally for a very simple small 'working from home' type business, not many suppliers, hardly any fixed assets, zero liabilities - the Ltd Company accounting fees would be in the region of £1k per annum?

 

[john1989]

Yes.

 

[Ola1]

err no, it depends

 

[MyAccountantOnline]

£1200 per annum is probably average.
@kevin.doran and @MyAccountantOnline are both respected members of UK Business Forums. Perhaps contact one of them for a quote?

You would also have the fee for the annual return filing which is £13 per annum.

Thank you very much John.

 

[kevin.doran]

Yes.

Based on the information provided i'd tend to agree, we certainly charge in that kind of region but that does include the cost of Clear Books.

It's worth shopping around but I wouldn't pick a firm based on cost alone unless the saving is significant, the nature of the relationship is far more important in my mind.