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| | | Forum Newbie
Group: Forum Members
Last Login: 19 February 2009 19:15
Posts: 5, Visits: 8 |
| Hi experts!
Is it best to be a registered company? If so how do you go about it?
My business is dresssmaking with an online boutique and bespoke service which I plan to run primarily through a website as I am expecting a baby in a little over a week so want to be at home. I would also be interested in any advice on SEO
Thanks |
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| | | Forum Member
Group: Administrators
Last Login: 02 April 2009 20:34
Posts: 31, Visits: 176 |
| Hi Lizzie
There are advantages and disadvantages for choosing to be a registered company:
Advantages
• Limited liability. It can be risky to start a new business and you might be giving up a regular secure job, borrowing money etc and if it all goes wrong it can be reassuring to know that the risk is limited to just that - and not your home, for example, or pushing you into bankruptcy.
• Gives gravidas - your customers are likely to feel reassured if you are limited, and you sound a bigger concern that you might be, especially at first.
• Tax advantages - because limited companies have a different tax structure, it can give you advantages that you wouldn't have if you were just self employed. To find out exactly what those are for your personal circumstances you did to talk to an accountant.
Disadvantages
• Accountants costs - Company tax returns are way more complex than personal ones and you'll need to spend between £500 and £1,000ish a year to get them done properly - and if they aren't, you'll risk being debarred from being a director and face a fine.
• More stringent requirements - opening a company bank account is much more complicated (at least two signatures for a start, just to open it, the director(s) and the company secretary) and if you are renting premises your landord may request personal guarantees. Trade suppliers may do as well.
• Liability for trading when insolvent - if you are running a non-profit company for too long you may be classed as a hobby, or may face a liability penalty, although this is rare for small fry!
Hope that helps
Claire
Professional Writer, Editor, Publisher
Home Business Expert
Funky Angel Consultant
www.funkyangel.co.uk |
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| | | Forum Newbie
Group: Forum Members
Last Login: 19 February 2009 19:15
Posts: 5, Visits: 8 |
| Thanks Claire, very helpful
Lizzie |
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| | | Forum Newbie
Group: Forum Members
Last Login: 19 February 2009 18:43
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| Having worked in public practice for almost 15 years and currently practicing on my own I would say that in my experience a limited company is easier to operate than a sole trader or partnership.
A limited company is a separate legal entity which is a self contained 'unit' containing trade and assets/liabilities - it is also responsible legally for any potential action taken against it (although directors are liable for failings in more severe cases where negligence or fraud etc take place).
A sole trader or partnership is actually you as a person and the individual or partners jointly and severally will be liable for any legal actions taken against them.
Claire is correct when she alludes to the positive public perception of a limited company status as it gives confidence that the business is more established and 'thought out'.
There have been changes in the Companies Act which take away the requirement to appoint a company secretary. The result of this is that a company may be established with a sole director who is also a sole bank signatory. This simplifies matters greatly.
As far as taxation is concerned the benefits of limited company status over sole tradership or partnership will depend upon level of profits chargeable to tax. The government have been keen to equalize the tax bands of limited companies with those of sole traders and partnerships to guard against any potential benefit of working through a limited company as a 'service vehicle'. However, generally speaking the benefit of a limited company is that shareholders may draw a dividend which does not give rise to any further taxation as long as that person remains with the basic rate tax band (circa £35k after personal allowances). Also, no NIC is due on this amount. However, on the flip side dividends are not tax deductible for the company.
If losses are expected in the first period of trading it may be as well to begin as a sole trader or partnership since these losses may be relieved against employment income previously; giving rise to a tax refund.
Taxation is a complicated subject and I note above a few items worth considering. A more in depth review is required in all cases before decisions are made as to which vehicle to trade through is decided upon.
As far as accountancy fees are concerned I would say that these also vary considerably from accountant to accountant; particularly if comparing a larger public practice firm with higher overheads to a freelance accountant with lower overheads. I would also point out from a personal viewpoint that a freelance accountant may be able to give you more time and energy without the need to write out a hefty cheque each time you ask for advice. Of course, the levels of skill and expertise will vary and if using an established practice you can generally rely upon 'clean' and effortless processing of affairs.
I hope this helps and I have not added confusion
JD
Financial Chartered Certified Accountant
Turnaround and Management Association member |
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