New Business set up? Complete minefield!!!

sashybashy · 28 February 2015 at 12:26AM

So... I am currently employed my my partners business at 16 hours per week for general admin, advertising, web management, calls etc but wish to start up my own business to bump up our income as i have time to do so.

I am pregnant (due June) my 16 hours employed work i do from home so not a bother at all and my business i would be starting just maybe 1 day per week at the minute. I have conducted advertising trials and know the business has a place as well as securing clients already and can create earnings so i am not worried about any risk. if anything i feel it would give me more flexibility to work whilst pregnant and even a day per week after the baby is here until settled.

My concern and pure confusion now comes into play with a sole trader vs limited company dilemma. I am not envisaging the business making much money in the first year or two due to family commitments, nor do i believe it will be a huge company. It is simply me, performing a service and being payed for it. However, we do get tax credits at the minute (partner self employed, me 16 hours per week) so how does anything like that impact on sole trader vs limited? not that i envisage being on tax credits forever however i will more than likely still need to rely on them at the outset until i build and grow my business.
Ive had really strong mixed advice saying SOLE TRADER much easier blah blah blah however benefits use gross profit/loss for earnings?? whereas limited you pay yourself a wage? I would barely take £50 per week from my business until its substancial to not claim a penny in benefits as i would still be receiving my 16 hours per week wage... then ive had people screaming LIMITED at me...

Im clueless to the jargon used as so used to being employed so any advice id literally need in the simplest of terms so i could try and absorb it, it is beyond confusing...

Thank you in advance x

capeverde · 28 February 2015 at 5:47AM

You only need to be a sole trader given the information. The set up and accounting are a lot simpler and cheaper and there are far less regularity requirements. Also your NI and tax would be as a self employed person and thus cheaper. If and when your company grows you can always change its status. The only initial benefit for a Ltd company is that it limits your liability to the assets within the company. This has little bearing though as nobody will give you credit or loans for a number of years or until you have a trading history without personal guarantees.

sashybashy · 28 February 2015 at 9:05AM

Thank you I was just unsure as to why people would guide me towards a limited company when it does seem far more hassle

MsBlonde · 28 February 2015 at 10:27AM

sashybashy wrote: »

Thank you I was just unsure as to why people would guide me towards a limited company when it does seem far more hassle

If you're a ltd company and the company fails, if you've taken out credit with companies, you as a person are not liable for it, the company is, if you dissolve/liquidate the company no debts can be chased to you personally.

Annisele · 28 February 2015 at 11:15AM

It partly depends on what you're doing.

When I ran my own business, I had it as a limited company even though its turnover probably suggested being a sole trader was more sensible. That was mainly because if I made a mistake, I could have caused my clients to lose £500,000 plus - and I didn't want personal liability for that! I did have professional indemnity insurance, but it had a £2 million limit. My plan was that if I ever did make a mess that big, I'd just close down the company.

Being limited wouldn't have saved me entirely - a spectacular mess wouldn't have been good for future business - but I'd probably have escaped bankruptcy. I *never* gave any personal guarantees for anything.

capeverde · 1 March 2015 at 8:55AM

sashybashy wrote: »

Thank you I was just unsure as to why people would guide me towards a limited company when it does seem far more hassle

Because people generally have an opinion on things they know little about. On the industrial estate where my factory is we have a burger van and on her friends advice she registered that as a limited company !! I started my business as a sole trader and only moved to limited status as the business grew. The only thing that has really impacted me from this is for vehicle lease options. Despite the fact I have been trading 5 years, lease companies will not factor this in and only take the 2 years since I have been limited and as most require 3 years trading history it has taken some work. Banks are the same and dont tend to have much of a common sense approach. Wish you luck, most of which can be 'bought' with a serious amount of hard work and commitment.

ACF95 · 3 March 2015 at 7:10PM

Annisele wrote: »

It partly depends on what you're doing.

When I ran my own business, I had it as a limited company even though its turnover probably suggested being a sole trader was more sensible. That was mainly because if I made a mistake, I could have caused my clients to lose £500,000 plus - and I didn't want personal liability for that! I did have professional indemnity insurance, but it had a £2 million limit. My plan was that if I ever did make a mess that big, I'd just close down the company.

Being limited wouldn't have saved me entirely - a spectacular mess wouldn't have been good for future business - but I'd probably have escaped bankruptcy. I *never* gave any personal guarantees for anything.

May I be so bold as to ask what your business was?

New Business set up? Complete minefield!!!

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free