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    • eclipse1989
    • By eclipse1989 28th Jun 17, 10:33 AM
    • 2Posts
    • 0Thanks
    eclipse1989
    Do we have to take a salary?
    • #1
    • 28th Jun 17, 10:33 AM
    Do we have to take a salary? 28th Jun 17 at 10:33 AM
    Hello!

    Have been browsing the forum and online for a while but couldn't find a definitive answer.



    My partner and I are looking to start our own business in the very near future. To begin with, it will only be at evenings/weekends and we will both continue to work full time for the time being.


    My question is, for the first year or so whilst we are getting the business off the ground, will we need to take a salary? Financially we don't need to as our salaries from employment are reasonable and we would like to keep as much money in the business as possible to help it grow.


    It doesn't seem an issue in my eyes however just want to be sure on the legalities, the last thing we want is to be screwed by HMRC.


    Just to add, it will be a limited company that isn't VAT registered if that makes any difference.


    Thanks all!
Page 1
    • firefox1956
    • By firefox1956 28th Jun 17, 10:53 AM
    • 1,344 Posts
    • 761 Thanks
    firefox1956
    • #2
    • 28th Jun 17, 10:53 AM
    • #2
    • 28th Jun 17, 10:53 AM
    The definitive answer will come from your accountant.
    You do have one ??
    • bengalknights
    • By bengalknights 28th Jun 17, 11:39 AM
    • 4,158 Posts
    • 1,519 Thanks
    bengalknights
    • #3
    • 28th Jun 17, 11:39 AM
    • #3
    • 28th Jun 17, 11:39 AM
    As a limited company a director does not need to take a salary only a remuneration

    Employees do have to be paid the minimum wage though
    • 00ec25
    • By 00ec25 28th Jun 17, 11:45 AM
    • 5,359 Posts
    • 4,700 Thanks
    00ec25
    • #4
    • 28th Jun 17, 11:45 AM
    • #4
    • 28th Jun 17, 11:45 AM
    do you mean "partner" as in co-habiting? If you have a limited company then you are not partners, you are, I assume, both shareholders of the company (and possibly also joint directors of it?)

    the company will pay corporation tax on its profits, there is no escaping that obviously

    the company's employees/directors (ie you pair) are not required to take a salary, so that would mean the company's profits are a bit higher (salary would be cost and so lower the corporation taxable profit) but would also mean the money sits in the company for as long as you leave it there and has no impact at all on either of your personal tax positions

    if you decide to take money out of the company in the future your accountant can advise on the most tax beneficent way to do so. Typically that will mean a combination of salary and dividends
    • eclipse1989
    • By eclipse1989 28th Jun 17, 11:59 AM
    • 2 Posts
    • 0 Thanks
    eclipse1989
    • #5
    • 28th Jun 17, 11:59 AM
    • #5
    • 28th Jun 17, 11:59 AM
    As a limited company a director does not need to take a salary only a remuneration

    Employees do have to be paid the minimum wage though
    Originally posted by bengalknights
    Thank you - we will both be directors with no employees.

    do you mean "partner" as in co-habiting? If you have a limited company then you are not partners, you are, I assume, both shareholders of the company (and possibly also joint directors of it?)

    the company will pay corporation tax on its profits, there is no escaping that obviously

    the company's employees/directors (ie you pair) are not required to take a salary, so that would mean the company's profits are a bit higher (salary would be cost and so lower the corporation taxable profit) but would also mean the money sits in the company for as long as you leave it there and has no impact at all on either of your personal tax positions

    if you decide to take money out of the company in the future your accountant can advise on the most tax beneficent way to do so. Typically that will mean a combination of salary and dividends
    Originally posted by 00ec25
    Hi 00ec25,

    Thank you for your reply.
    My partner (wife) will be the other company director, we will both be directors and shareholders within the company.
    Your response is much appreciated. We don't have an accountant yet, it is one of the next things we will do however trying to do as much research as possible ourselves so we have some idea of what we are talking about

    Cheers
    SG
    • antrobus
    • By antrobus 28th Jun 17, 2:31 PM
    • 15,275 Posts
    • 21,789 Thanks
    antrobus
    • #6
    • 28th Jun 17, 2:31 PM
    • #6
    • 28th Jun 17, 2:31 PM
    ...My question is, for the first year or so whilst we are getting the business off the ground, will we need to take a salary? Financially we don't need to as our salaries from employment are reasonable and we would like to keep as much money in the business as possible to help it grow.
    Originally posted by eclipse1989
    There is no requirement to take a salary.

    Directors are office holders, and not employees, and the NMW does not apply.

    https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage

    But you'll get better advice by hiring an accountant.
    • fishybusiness
    • By fishybusiness 28th Jun 17, 6:00 PM
    • 1,128 Posts
    • 698 Thanks
    fishybusiness
    • #7
    • 28th Jun 17, 6:00 PM
    • #7
    • 28th Jun 17, 6:00 PM
    2 directors will mean you need Employers Liability Insurance - non negotiable I'm afraid, it is the law.
    • firefox1956
    • By firefox1956 28th Jun 17, 7:35 PM
    • 1,344 Posts
    • 761 Thanks
    firefox1956
    • #8
    • 28th Jun 17, 7:35 PM
    • #8
    • 28th Jun 17, 7:35 PM
    You should have taken on an accountant BEFORE you decided to set up a Limited Company......it might not have been the best thing to do.
    ( Bit late now though !! )
    • fishybusiness
    • By fishybusiness 28th Jun 17, 9:27 PM
    • 1,128 Posts
    • 698 Thanks
    fishybusiness
    • #9
    • 28th Jun 17, 9:27 PM
    • #9
    • 28th Jun 17, 9:27 PM
    You should have taken on an accountant BEFORE you decided to set up a Limited Company.....
    OP uses future tense defining what they plan to do, not what they have done.
    • reason2
    • By reason2 11th Jul 17, 3:07 PM
    • 193 Posts
    • 209 Thanks
    reason2
    "fishybusiness Old 28-06-2017, 6:00 PM


    2 directors will mean you need Employers Liability Insurance - non negotiable I'm afraid, it is the law."


    Are you sure?

    "If you have employees, contractors, casual workers or temporary staff, you are usually required by law to take out employers’ liability cover, to deal with any claims from employees who’ve been injured or become seriously ill as a result of working for you."

    2 directors are not employees or contractors or casual or temporary workers.

    My business has 3 directors and no other staff and we have been told we do not require ELI
    Last edited by reason2; 11-07-2017 at 3:07 PM. Reason: missed quote
    • reason2
    • By reason2 11th Jul 17, 3:12 PM
    • 193 Posts
    • 209 Thanks
    reason2
    2 directors will mean you need Employers Liability Insurance - non negotiable I'm afraid, it is the law.
    Originally posted by fishybusiness
    the gov website answers my own question

    exempt are
    ■ companies employing only their owner where that employee also owns 50% or
    more of the issued share capital in the company.

    So OP would be exempt too
    • fishybusiness
    • By fishybusiness 12th Jul 17, 9:29 PM
    • 1,128 Posts
    • 698 Thanks
    fishybusiness
    @reason,

    Yes I am sure.

    OP was talking about salaries, and maybe not in the first year. Any salary is indicative of deductions of NI and Tax, those alone will define the requirement for ELI.

    Directors as Office Holders, taking no salary will be exempt.

    It's more complicated than that...accepted, but the HSE will prosecute if a business gets it wrong, so read the small print carefully.

    It's here for clarification.....

    http://www.hse.gov.uk/pubns/hse40.pdf

    companies employing only their owner where that employee also owns 50% or
    more of the issued share capital in the company.
    Not relevant as OP suggested 2 directors, the second changes things.
    • Mojisola
    • By Mojisola 12th Jul 17, 9:37 PM
    • 28,537 Posts
    • 72,674 Thanks
    Mojisola
    My partner and I are looking to start our own business in the very near future. To begin with, it will only be at evenings/weekends and we will both continue to work full time for the time being.
    Originally posted by eclipse1989
    Are you employing other people to do the work or are you going to be the employees of the company?
    • antrobus
    • By antrobus 12th Jul 17, 9:55 PM
    • 15,275 Posts
    • 21,789 Thanks
    antrobus
    You should have taken on an accountant BEFORE you decided to set up a Limited Company......it might not have been the best thing to do.
    ( Bit late now though !! )
    Originally posted by firefox1956
    No it isn't.

    My partner and I are looking to start our own business in the very near future.

    So they haven't started trading through the company yet. It's been set up in preparation for their upcoming business.

    It's not uncommon for people to set up limited companies and then not use them. Granted, it would mean that the cost of setting up the company would be wasted. £12 if you do it online. A bit more if you use an agent. But there are agents who will do it for a tenner or even less.

    But they should still get themselves an accountant. Preferably a proper one with letters after their name.
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