New business help please

Mrs_Chip

Hi

My husband and I are starting our own business, but I am unclear about the pros and cons of being a Sole Trader against a Partnership and which would be more tax efficient - neither of us will be working, so our only income will be from the business. Is it better for me to be a Sole Trader and employ OH, paying a reasonable, but fairly low wage, or would a Partnership be better?

As you can tell, this is all new to us, and we need as much help as you are willing to chuck at us!!!

jexygirl

Hi Mrs Chip
there are lots of threads on here with the same question, I just looked through the first few after searching, and most say "go see an accountant and run through the scenarios with them" most offer a half hour free or something, and even if you pay, it will be money well spent long term.
(havent posted links as most go off on a none relevant tangent at some point!)
As for employing your hubby I think you would have to pay him minimum wage - but could be wrong! Our accountant sorted out our best options and to this day still does! Worth every penny!
Someone clever will be along shortly to help you with your query

SIDE NOTE FOR SUE!
I wonder if Sue reads this, whether she knows someone clever and in the know with up to date advice, a regular on here perhaps, who could post something to be stickied, with the pros and cons of ltd co V sole trader V partnership etc. Just random basic rules and explaination, as so many people ask which way to go and what the benefits are, no idea if its even possible to produce a generic basics!

Jex

Mrs_Chip

Thanks - From reading a number of other posts from people starting out, it does look like an accountant might be helpful, we will be limiting our business to perhaps generating @ £2k profit (plus any tax and NI) per month (life-style change, just want enough to cover bills and live on, so will work hours that achieve that), so is it still worth using an acct?

jexygirl

Some would say no, but I stand by the fact that a good acountant will save you way more than they cost you in fees
LIMITING to 2k profit A MONTH! that is A LOT of profit for a small new buisness just setting out - can i buy a franchise???:D ! Are you sure of 2k profit, or is 2k your monthly turnover?
Jex

pitkin2020

Seriously, the best advice is to speak with a qualified accountant who can go through everything with you that is relevant to your business. This forum gives good advice at times but most advice is from experience that won't be the same as your venture. A good accountant will save you his fee alone!!

paulwf

There are two parts to this. Firstly the method that costs the least and/or is most tax efficient. Secondly - and most importantly - you need to consider who will be in control. Have a read of the threads about partnerships, an exact 50/50 split of the business can cause problems if you fall out further down the line. Although this may be unlikely it could potentially cripple the business if it happens so you might want to look at alternative setups.

Mrs_Chip

Ok, mind made up, accountant it is!

We dont expect to be achieving the £2k at the outset, but that is where we would want to be, but tbh as long as the bills are covered, we are happy to live on very little for benefit of being our own boss (already slashed our outgoings in preparation and really, it's not been a problem).

s_b

sole trader is more tax efficient than partner as you pay partner tax as well as income tax and class 4 to the govt
split the business 50 /50
you can both then take 74,000 before vat
dont go limited unless you expect to be sued for all your chattels and in this case maybe your business isnt a good one after all?
i suppose saying what you intend to do would have been a help but i suppose theres no one doing personalised birthday cards and you may be frightened it could be plagarised?
as for an accountant they arent cheap and come in two camps ,very good or waste of space,ive had dealings with both types and their services dont come cheap,basically if you can post on this site without the need of a teacher then you can do your own books and save accountant fees or do as i did let the accountants do the books the first year see what a hash they make then do them yourself after all the tax hassles they get you into

bengasman

A good accountant is worth his keep, but make sure you don't get a glorified bookkeeper. Good accountants know how to save you more money on your tax bill than their cost to you.
Not a lot of them about though.
What kind of business are you starting?

Mrs_Chip

:rotfl: s b - Nothing so posh! We are going to be mobile caterers! Can you explain what you ean by 'split the business'? I presume you mean for VAT threshold, but not sure how that would work? I would not want to be vat reg if at all possible.

I don't anticipate there being issues with debt etc, we have no business loans, have sufficient capital should we need it to live on, our only creditors will be our suppliers and I do not intend there ever to be any outstanding bills (wishful thinking?), so see no benefit of being Ltd

s_b

easy
one of you owns the trailer and car
other one can pay to rent part of the trailer and say specialise in tea and buns
this way you both do your own books and can easily split the bills
accounting is dead easy, keep receipts for everything a book from staples is cheap for weekly/daily accounting ,buy one then scan it on your computer and never need to buy another one
doing the self assesment form at the end of the year is also straight forward and depending on your turnover and income could be a 5 minute job if its basic like a window cleaner i know
seriously even if you go partnership and it might be better in your case its really straight forward,keep a clean nose with regards to book keeping and its easy peasy

really good luck go for it but remember a clean mobile caterer is a popular mobile caterer,do an inspection from the customers perspective daily and make sure marker boards are easily seen and read with prices but minimal so as not to confuse:)

im not in catering but have dabbled