Sole Trader or Ltd Company?

dottygirl

Hi with the shop coming along. I have to decide if I go for Sole Trader or a Ltd company. Any suggestions? I feel I should go down the Ltd company. Would there be any advantage to adding my daughter as a partner she is at uni and wont be taking part in the shop for many years. Any advice would be helpful. ps. shop is coffee shop and fairtrade shop.

Savvy_Sue

WHAT DOES YOUR ACCOUNTANT SAY? have you read, marked, learned and inwardly digested what Businesslink has to say about the different kinds of start up?

And if you don't yet have an accountant, and you're seriously thinking of going for a ltd company, please get some advice first. Yes you can buy a ltd company off the shelf, but if you don't understand the advantages and disadvantages, you could end up in a mess.

And if you DO make your DD a partner, please get a PROPER partnership agreement drawn up, with legal advice.

I am not sure why you'd want to make your DD a partner at this stage, as it happens, but why not ask whether it would be possible to add her later?

smashee72

My advice before doing anything would be to find the best accountant that you can find to advise you about this. Recommended if possible by someone you know. They know the ins and outs of absolutely everything business/tax /law related and keep you on the right track. This is so important -but bear this in mind as a bad accountant can totally screw you over.

dottygirl

Thank you both for your advice. Every time I think I have it clear in my head I find some more info! I will take on board what you have both said. x

keith1950

Hi, although I am now just a wage slave I had a limited company for a few years.

I would say don't even consider the limited company route unless you are expecting to make serious money.

You would probably need to register for VAT, you would need to pay corporation tax and submit yearly company accounts to Companies House.

The accountancy costs would therefore be much higher, although that would leave you more time to concentrate on trading.

There are extra financial benefits by adding your daughter as , say, the company secretary, so you can pay her dividends but its not worth it if your turnover won't support paying out extra money.

If your turnover is over £100,000 per annum it's definately worth considering.

It can be a big jump going from sole trader to limited company , just make sure it's worth it.

cinderfella

There is no advantage in going the Ltd Co route. There used to be a few years back but not any longer. Save yourself some serious money and red tape & just forget about it.

sandraroffey

limited company is a waste of time. once there are share holders involved it is no longer your company. you are employed by the company. the profits, strictly speaking arent yours either, they belong to the shareholders, which will prob be you. the company will have to pay you a wage, which you will pay tax on, then oyu will have to pay corporation tax on the companies profit. you will need lots of red tape bla bla. keep it your company.

Snakeeyes21

keith1950 wrote: »

Hi, although I am now just a wage slave I had a limited company for a few years.

I would say don't even consider the limited company route unless you are expecting to make serious money.

You would probably need to register for VAT, you would need to pay corporation tax and submit yearly company accounts to Companies House.

The accountancy costs would therefore be much higher, although that would leave you more time to concentrate on trading.

There are extra financial benefits by adding your daughter as , say, the company secretary, so you can pay her dividends but its not worth it if your turnover won't support paying out extra money.

If your turnover is over £100,000 per annum it's definately worth considering.

It can be a big jump going from sole trader to limited company , just make sure it's worth it.

VAT - you will have to register regardless if your turnover reaches a certain level, being a Ltd compay doesnt have any bearing on this.

Corporations tax - Do it right and pay a mix of dividends and a small salary a limited company will save you money, no if's no buts, its a given, as sure as death will come a knocking some day. I think where you begin making a small amount over being a sole trader is around 12K+

Yearly accounts - very simple abbrieviated accounts for nearly every small business in this country, these arent hard to prepare, no harder than doing a self assessmet for yourself.

Other filing obligations, again very simple stuff.

Some people get worked up with all the extra 'admin' thats involved, in reality its next to nothing and anybody is more than capable of doing it.

One of the main benefits of being a limited company within the catering / hospitality trade is the lack of personal liabiity you will have on your shoulders should the business fail, and a hell of alot in this sector fail within the first 12 months, when you are dealing with a liability of 50k+ in the form of a lease then being a limited company is worth the tiny amount of extra work to shield yourself from being personally responsible for this.

Havig said that get advice from a accoutant

keith1950

Snakeeyes21, I don't see where I said anything about VAT and level of turnover !! I said 'probably' register for VAT because I could not remember if this was compulsory with a limited company.

However, if the turnover is less than the VAT threshold it can make you uncompetative to have to register for VAT,when similar trades are not VAT registered.

We all know that a mix of dividends and a small wage can save you money but it's not as lucrative as it used to be.

You have to remember that everyone isn't as clever as you......... .................................are they?

LittleVoice

keith1950 wrote: »

Snakeeyes21, I don't see where I said anything about VAT and level of turnover !! I said 'probably' register for VAT because I could not remember if this was compulsory with a limited company.

However, if the turnover is less than the VAT threshold it can make you uncompetative to have to register for VAT,when similar trades are not VAT registered.

We all know that a mix of dividends and a small wage can save you money but it's not as lucrative as it used to be.

You have to remember that everyone isn't as clever as you......... .................................are they?

No, you did not say anything about level of turnover in relation to VAT. This was an omission which could be misleading as the reason for your "probably" was not mentioned.

keith1950

No, you did not say anything about level of turnover in relation to VAT. This was an omission which could be misleading as the reason for your "probably" was not mentioned.

Oh, we are a clever clogs aren't we???


dottygirl, you might like to read this:-

I’m really hoping that someone will help me. I know I’ve been really stupid but if anyone knows I would really appreciate you helping me out.

My husband and I were the sole Directors of a limited company that hadn’t traded for a year. At the end of July this year the company got struck off the register at Companies House. However, an old debtor paid £6000 owing to the company a week prior to the company being struck off the register. The bank have now sent us a letter saying that the money is now ‘bona vacantia’. I contacted the bank to be told that the money will be sent to the crown next week and unless the company is reinstated there is nothing that can be done about this. My first question is therefore - is there anyway to stop Barclays sending the money to the treasurers secretary and send it to us?

I have read the information on companies house, and it seems that we can’t reinstate the company as it wasn’t trading and also we owe Companies House about £2500 in penalties due to non-filing of the accounts with them.

My second question is – we also owe HMRC about £1000 in outstanding corporation tax and penalties. These accounts and corporation tax returns are with our accoutants now for completion. Therefore my second and third question is – do we still need to complete the accounts for HMRC and does the company still owe HMRC the Corporation Tax?

I am in a a terrible panic about this, I meant to take the money out of the bank prior to it being dissolved, but unfortuately forgot, due to ongoing health issues with my baby son, which is why we stopped trading in the first place. I know I’ve been extremely stupid and I’m really hoping someone can give me some good advice. Thanks.