ltd company?

heythereguys

hello lovely people,

i am starting a new business which will be selling one line and brand of a cleaning product which is in a spray bottle.

what i want to know is, do i need to be vat registered or have a limited company?
i have heard some things about not needing anything until you are earning 70k a year but i wanted to make sure...

sorry if it sounds daft but can somebody explain in a few simple steps what it is that i need to do to cover myself legally.

thanks so much!

pooch

heythereguys wrote: »

hello lovely people,

i am starting a new business which will be selling one line and brand of a cleaning product which is in a spray bottle.

what i want to know is, do i need to be vat registered or have a limited company?
i have heard some things about not needing anything until you are earning 70k a year but i wanted to make sure...

sorry if it sounds daft but can somebody explain in a few simple steps what it is that i need to do to cover myself legally.

thanks so much!

No, there is no legal requirement for you to form a limited company.
This answer is not affected by your profit (or turnover)

Check out the HMRC website for rules on VAT registration.

I would suggest you seek independent expert advice to cover yourself legally. e.g. an accountant, solicitor, etc as appropriate.

Savvy_Sue

Not to mention product liability insurance

paddyrg

The benefit of going limited will help with your liability if your product harms someone and they sue - but it comes at a price and with responsibilities

heythereguys

Ok, I'm not less confused than when I started the thread but thanks.

novelty-socks

There's loads of information available about this online. For instance:

http://www.startupdonut.co.uk/startup/set-up-a-business/choose-the-right-form-of-business
https://www.gov.uk/business-legal-structures/overview
http://www.cheapaccounting.co.uk/advice/sole-trader-or-limited-company.php

Broadly, it boils down to a couple of things:

Tax efficiency. For many people, operating as a Limited Company is more tax efficient than being a sole trader. However, there are some new rules coming in that affect Limited Company owners who receive dividends from their businesses, and these will affect the amount of tax they have to pay.

Limited liability. If you're a sole trader, there's no distinction between what you own and what the business owns. This means that if one of your customers sues you, they could take everything you own. If you run a Limited Company, they can come after everything the company owns, but they can't, generally, come after your personal assets.

There are other complications though. For instance, if you operate a Limited Company, you can't just take cash out of it whenever you want for personal use. That's because the money belongs to the business, not to you.

As you can see, it is somewhat complex. It depends on what's most important to you, how much money you expect to make, and so on. That's why it's a good idea to speak to an accountant. Many will offer a 30-minute consultation or similar for free.

Pennywise

Whatever you do, you have to register for tax with HMRC. As a sole trader, you register for self assessment to pay income tax and NIC on profits. As a limited company, you register for corporation tax on profits.

VAT is completely separate. Unless your turnover exceeds the threshold, you don't have to register for, and charge VAT, whether you are a sole trader or limited company.

If you're new to all this, you need to do proper research on each aspect, i.e. VAT registration or not, and limited company or not. It's not particularly complicated, but you do have to look at all areas in isolation so that breaks things down into more easily understandable chunks.

pooch

heythereguys wrote: »

Ok, I'm not less confused than when I started the thread but thanks.

OK, I'm confused as to why you are not less confused after I provided earlier the simple & straightforward answers to questions you posed.

But thanks for the feedback...

MataNui

The Tax is a big part of it. If you are a sole trader you will fill out a personal tax return. You will then pay the balance of tax owed for the previous tax year (the year the return is for) PLUS half for the next year (the other half being payable half way through the year). This can be a pain for cashflow. Your first year will be VERY expensive taxwise and if you have very variable annual income can break you.

This isnt an issue with a ltd company though. You just pay the tax owed at the end of the tax year.