What type of business should I setup, eg. Sole Trader or PLC?

[uaesthetics]

Hey guys, new to business and getting different advice from different accountants I got in touch with.

I work in Web/App Development. I've mostly done fulltime work but done a bit of contract work in the past that I did via a Private Limited Company, then I closed that as I went primarily only on a fulltime role.

My situation now is that, I'm looking to take in contract work on the side, this would be as of now an annual turnover of less then 50K a year

I also am open to a fulltime role and have a few offers I'm considering with annual salary's in the 50-60K mark and I would like to take on a fulltime role

In this situation, should I form a Private Limited or should I act as a Sole Trader?

Thanks

 

[Ecomccountant]

So if you have PAYE income and a business its almost always better to go Limited company route due to being able to extract via dividends.

Otherwise you will be charged income tax on the 60k full time and 50k limited - putting you in the marginal tax rate.

 

[uaesthetics]

So if you have PAYE income and a business its almost always better to go Limited company route due to being able to extract via dividends.

Otherwise you will be charged income tax on the 60k full time and 50k limited - putting you in the marginal tax rate.

Thanks for this. Ok I understand. And when I make a PLC should I name it under my parents name or my spouse for example? Does that make a difference on anything when it comes to reducing the amount of tax I get hit or what and how I can extract?

 

[Ecomccountant]

You should raise it under your name. If admin is performed by your spouse you can make her a shareholder but make sure you issue a different class of shares so she can get paid a different dividend.

Bare in mind that there is more admin as a limited company and need to make sure you get good advice.

 

[Mr D]

Can set a company up under whatever willing names. Just remember however they have power.
Some people have tried the 'setting up under parents names only' then been shocked when parents have taken responsibility and run the business in a different direction and making different decisions. As they should.

 

[Ecomccountant]

Can set a company up under whatever willing names. Just remember however they have power.
Some people have tried the 'setting up under parents names only' then been shocked when parents have taken responsibility and run the business in a different direction and making different decisions. As they should.

It's ethically dubious to set up a company when they have very little to nothing to do with it and I wouldn't recommend it.

 

[Mr D]

It's ethically dubious to set up a company when they have very little to nothing to do with it and I wouldn't recommend it.

Shareholders may have nothing to do with a company. Or may become shareholders due to investment in the business or reward for something.
Or as a backup.

Directors may not always work in the company full time, may indeed only act as directors for fulfilling responsibilities.

 

[Chris Ashdown]

Don't confuse the terms LTD company with PLC companies, PLC is basically for very large companies and means public limited company,

 

[MyAccountantOnline]

Hey guys, new to business and getting different advice from different accountants I got in touch with.

I work in Web/App Development. I've mostly done fulltime work but done a bit of contract work in the past that I did via a Private Limited Company, then I closed that as I went primarily only on a fulltime role.

My situation now is that, I'm looking to take in contract work on the side, this would be as of now an annual turnover of less then 50K a year

I also am open to a fulltime role and have a few offers I'm considering with annual salary's in the 50-60K mark and I would like to take on a fulltime role

In this situation, should I form a Private Limited or should I act as a Sole Trader?

Thanks

An accountant should be basing their advice on a lot more information than you've posted here.

If you've asked more than one and got different answers do ask why, and ask them to explain fully the reasons for the advise they gave you.

 

[Victoria_V]

Whether you choose to set your business up as a LTD company or as a sole trader will depend on your other income and lot of other factors. If you are self employed and income from your self employment is your only source of income, then you will not pay any taxable profits from your business if it’s under the personal allowance of £12,500.


If you choose to set your business up as a LTD company, your LTD company will pay corporation tax at 19% on taxable profits. Taxable profit is calculated by deducting your allowable expenses from the revenue your business generates.

https://www.gov.uk/corporation-tax-rates


A LTD company is a separate legal entity and to take money out from the business, you can pay yourself a salary and/or pay yourself a dividend. If pay yourself a salary from the business, you will have to set the business up as an employer and may also need to pay employer’s national insurance on your salary from the business depending on how much salary you take from your LTD company .


The salary that you take out from the business will be an allowable expense for corporation tax purposes and therefore reduce the profits your ltd company makes. Subsequently this will also reduce the corporation tax the business pays. You can also pay yourself a tax free dividend of up to £2,000 from your ltd company(Subject to your business generating enough profits to pay a dividend). Dividends over £2,000 will be subject to income tax rates depending on your tax bracket.

https://www.gov.uk/tax-on-dividends


However, If your total income from all other sources(full time employment e.t.c) is over £50,000, then you will be a higher rate taxpayer and any additional income such as income from self employment will be subject to higher rates of income tax(40% or 45% depending on your taxable profit).

 

[uaesthetics]

Hey Vic, thanks so much for this breakdown - this is very kind of you and clear

In my case my salary will be over 50K as that's just the salary of my fulltime job alone so it means any . extra work I do, I'm thinking as a side business I'm expecting in a year maybe 10-15K max

In this case what you recommend?

 

[strikingedge]

Don't confuse the terms LTD company with PLC companies, PLC is basically for very large companies and means public limited company,

From memory, £50k of paid up shares, audit and AGM are what you need to register as a PLC.

Any company likely to do £6m in the following year should consider changing from Ltd to PLC.

You get an instant boost in your credit rating, get taken more seriously by your suppliers and various other intangible benefits. If you wanted to sell shares directly to the public (eg your customers), then you’ve got the right vehicle.

Not just for “very large” companies!

Like many people I thought you needed a stock market listing to be a PLC, but that’s not the case, as I’m sure many on UKBF know, but I certainly didn’t!

Granted not of much use to the OP! This might be:

One thing a friend of mine did - he was an engineering contractor and used his own limited company working for a single customer, paying himself and his wife (help with admin etc) small salaries plus occasional dividends to minimise tax.

He left a lot of money sitting in the company.

His employer changed policies and he can no longer use his Ltd company and needs to contract direct.

He shut it down and using his Lifetime Entrepreneur Allowance, only paid 10% tax transferring the balance to himself.

Is this legal? Apparently so, but his accountant suggested he didn’t start another similar company for 3 years to avoid a closer look from HMRC.

 

[TheoNe]

PLC is public limited company (stock market traded), it's just LTD.