Sole Trader or Ltd Company?

Pennywise

I use a simplistic assumption that if profits are over £25k p.a. then it's probably best to operate via a limited company. At that level, the tax/NIC savings more than compensate for higher accountancy and other costs, leaving you better off overall. Profits under that kind of level and you're more looking at breaking even after accountancy and other costs. Profits under £10k, don't even bother going there!

Of course, that's just the tax/NIC savings. As others have said, also consider limited liability which can be beneficial regardless of profit/turnover, as even a single "job" costing just a few hundred pounds going wrong can land you with massive claims against you, if you're in that kind of risky business.

VAT is different - the same rules apply whether limited or not, so it isn't a factor in deciding which way to go.

dottygirl

Thank you all for your views. More things to think of! I will again talk to my accountant. Thank you for taking the time to answer me x

poppasmurf_bewdley

dottygirl wrote: »

Thank you all for your views. More things to think of! I will again talk to my accountant. Thank you for taking the time to answer me x

Your accountant will advise the limited company route - because limited company accounts HAVE to be prepared by an accountant, you can't do them yourself as you can with a sole trader.

Suarez

I thought a book keeper could do the account up to the trial balance?

marshfleur

Hello,

I set up a shop last September with my husband. We sought lots of advice and after weighing pros and cons, we have gone down the “partnership” route and not the Limited Company route yet. We are a very simple business, cash only, with (at present) a relatively small turnover – not enough to be VAT registered yet, to give you an idea. The Limited Company route, while obviously giving the assurances of limited liability, we felt was not advisable due to the level of complication involved. When we open our second shop, hopefully in the next 2 years, we would then look to change things. I think when starting a shop, if it is a simple proposition, likely to be small at first and your first year forecast is not earth shattering, it is generally simpler to go it as a Sole Trader. Of course, this is purely based on my own experience and you must seek the professional advice of a financial adviser/accountant before making any concrete decisions. I would also recommend scouring the Businesslink website so intently that you can recite it in your sleep! A huge help and, of course, free. On another note – I’m unsure why you would add your daughter as a partner at this stage? If not directly involved as yet, it would only complicate things for her tax wise, she would have to register as self employed – even if she is only a sleeping partner with no financial gain from the shop – and would have to fill out a tax return every year. As a Sole Trader it would be very simple to become a Partnership should she decide to join you at a later date.

Savvy_Sue

marshfleur wrote: »

I would also recommend scouring the Businesslink website so intently that you can recite it in your sleep! A huge help and, of course, free.

welcome. and thanks for that excellent advice. There's no substitute for doing your own research!