Your startup business status

[DanMartin]

A key question small business owners need to ask themselves when starting up is what legal status they opt for. Many entrepreneurs choose to be a sole trader but at what point, if any, should you become a limited company?

In addition, many of those running a social enterprise opt to register as a community interest company.

What are you experiences in this area? Post your comments below.

 

[Team Leith Training]

A key question small business owners need to ask themselves when starting up is what legal status they opt for. Many entrepreneurs choose to be a sole trader but at what point, if any, should you become a limited company?

In addition, many of those running a social enterprise opt to register as a community interest company.

What are you experiences in this area? Post your comments below.

There is no major issue in starting as a sole trader, i have found its often cheaper to do it this way just to see if your business model works. Pointless is spending money on incorporating a business, setting up business bank accounts, filing accounts etc if the business is going to sit dormant. As mine did for several years.

Looking back on it i would have started as a soul trader, BUT nothing gives you more credability than having a certificate of incorporation, and OR even being VAT registered. I have found over the years many customers prefer to see this. If you dont have that, they won't do business with you.

The tipping point too is when your income exceeds the VAT threshold. You need to be a registered company then (I think... another one to ask my accountant)

 

[Paul_Rosser]

Not sure about the VAT tipping point as a sole trader can register for VAT, but sure an accountant will be able to advise.

For firms with turnover of less than £150k who don't buy a lot of products then the flat rate scheme can work quite well, using this you still collect 20% VAT from your customers but only give a percentage to the HMRC keeping the rest as additional profit for your company.

 

[ITsoldUK]

The tipping point too is when your income exceeds the VAT threshold. You need to be a registered company then (I think... another one to ask my accountant)

The only action a ST needs to take once you hit the current VAT threshold of £77k t/o is that you need to register for VAT.

You do not (currently) need to become incorporated.

In answer to the original post, I would never envisage having to become anything other than a ST regardless of my business growth.

But that is just me

 

[Gillie]

A key question small business owners need to ask themselves when starting up is what legal status they opt for. Many entrepreneurs choose to be a sole trader but at what point, if any, should you become a limited company?

In addition, many of those running a social enterprise opt to register as a community interest company.

What are you experiences in this area? Post your comments below.

Each and every person setting up is different in circumstances and its at this point you need to chat to an Accountant to make sure you are doing what is best for you.

Think of the money spent talking to an Accountant as a savings account - they are the ones who can advise you and make sure your legal status works for you.

Oh and regards vat - anyone or any business can be vat registered - even if you dont plan to hit the threshold - again something an accountant would be the best one to advise you on this one!

 

[Cogminds]

Hi,

I am planning to import some interesting gift/novelty items in small scale and sell via websites like amazon;had a few queries:

a) Do I need to be registered with HMRC or any gov organization as sole trader or limited company

b) do I need an import license; what is the best way to import in small quantities and who is best placed to help with clearance

c) what other form of legalities do I need to adhere to for eg. I plan to stock very minimal quantity (couple of cartons/boxes) in my property...do I need any form of insurance.?

Highly appreciate any guidance in this regard.

 

[The Wages Room]

Cogminds, yes you do have to register with HMRC and that can be done quite easily on their website

 

[elaine@cheapaccounting]

Not sure about the VAT tipping point as a sole trader can register for VAT, but sure an accountant will be able to advise.

.

There is no distinction between business structures for vat registration purposes - it is the same (currently register if turnover for the previous 12 months is more than £77,000).

Note - it is not by financial or accounting year but previous 12 months.

 

[Paul_Rosser]

There is no distinction between business structures for vat registration purposes - it is the same (currently register if turnover for the previous 12 months is more than £77,000).

Note - it is not by financial or accounting year but previous 12 months.

Thanks Elaine.

The OP indicated that once you hit the VAT threshold then you have to become a limited company, which didn't sound right as sole traders can register for VAT.

.

The tipping point too is when your income exceeds the VAT threshold. You need to be a registered company then (I think... another one to ask my accountant)

 

[The Wages Room]

Elaine is quite right as usual. It is strange how these myths get spread!

 

[elaine@cheapaccounting]

Thanks Elaine.

The OP indicated that once you hit the VAT threshold then you have to become a limited company, which didn't sound right as sole traders can register for VAT.

No that is far from right - well spotted Paul. You have been reading our free guide

Elaine is quite right as usual. It is strange how these myths get spread!

Love the "as usual" - you are well trained for a relative newbie

Myths generally start from "the man down the pub" who seems to be a mine of useless and incorrect information on accounts and tax

 

[Caerleon9176]

Hello, I just wanted to clarify something on the question of VAT.

Should I start to charge VAT on goods i sell even IF i dont meet the VAT threashold?

 

[elaine@cheapaccounting]

You only charge vat if you are registered for vat

 

[Paul_Rosser]

Just to add to Elaines advice, if you are below the VAT threshold you can opt to register for VAT anyway, then you should charge VAT. If you haven't then no you shouldn't.

 

[The Wages Room]

I second the previous two comments. You can only legally charge VAT once registered. In the same way you can only reclaim VAT when registered.

 

[Joyous]

In answer to the original post, I would never envisage having to become anything other than a ST regardless of my business growth.

But that is just me

Sharp intake of breath!! You might be missing out on some subsantial tax savings with that mindset. Just sayin'...

Regards

Joy