ChatterBank1 min ago
Limited or Not
2 Answers
My partner has been self employed for 10 years and has recently employed two employee's. What is the benifits of being Limited and can you let me know if there is any pitfalls. I am very ignorant about business & financial benifits and would welcome some discussions on how to go forward with company growth.
Answers
1 to 2 of 2
Best Answer
No best answer has yet been selected by geewhiz 14. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.
The main advantage is that Ltd protects your personal assets such as the house if the company goes bust. There used to substantial tax advantages with Ltd but Gordon has done his best to remove most of these. There's a bit more administration associated with being Ltd. but its nothing compared to the hassle of PAYE or VAT from HMRC. And you've got that already.
To take a view on this question you really need to do a forecast and think about how much money you will require and might expect to make.
Extendinf buildersmate's answer, there will still be financial implications if the business requires an overdraft or credit facility such as guarantee or bond from the company's bank.. In such case a personal guarantee will almost certainly be required so you will still be exposed financially.
A ltd company needs a company secretary as well as a director (until Oct 2008 anyway)
If you do your own accounts you *may* need to have them audited as a ltd company which for a small business i would expect to be somewhere between �500 - �3000
There can also be significant tax advantages of being a shareholder of a limited company as opposed to being self employed. As a shareholder you may draw a salary taxed at the usual levels (up to 40%, which is what youd pay as a self employed person) but any monies that you take out that are profit linked (ie dividends) will be taxed as capital gains ie 18%. BUT as a limited company any profits are ALSO taxed at corporation tax levels, before you draw them out and pay the 18%
and there are lots more issues. Go and have a look at www.businesslink.gov.uk which is an excellent website full of info and your local office may be able to send an advisor round for a one to one chat.
Extendinf buildersmate's answer, there will still be financial implications if the business requires an overdraft or credit facility such as guarantee or bond from the company's bank.. In such case a personal guarantee will almost certainly be required so you will still be exposed financially.
A ltd company needs a company secretary as well as a director (until Oct 2008 anyway)
If you do your own accounts you *may* need to have them audited as a ltd company which for a small business i would expect to be somewhere between �500 - �3000
There can also be significant tax advantages of being a shareholder of a limited company as opposed to being self employed. As a shareholder you may draw a salary taxed at the usual levels (up to 40%, which is what youd pay as a self employed person) but any monies that you take out that are profit linked (ie dividends) will be taxed as capital gains ie 18%. BUT as a limited company any profits are ALSO taxed at corporation tax levels, before you draw them out and pay the 18%
and there are lots more issues. Go and have a look at www.businesslink.gov.uk which is an excellent website full of info and your local office may be able to send an advisor round for a one to one chat.
1 to 2 of 2
