Limited Company

raddy59

Can someone tell me what are the advantages and disadvantages of setting up a Ltd. company rather than being sole trader? What admin is required in a Ltd. company, even if I have the company but haven't used it to trade yet?

tacpot12

The advantages are:
1) Appearance of stability and propriety
2) Limited Liability
3) Ability to take contracts that require the supplier to be a limited company

Disadvantages are:
1) Liability for Corporation Tax
2) Liability to charge VAT once your turnover exceeds the threshold
3) Having to prepare and submit accounts to Companies House (As a sole trader you would only need to prepare and submit accounts to HMRC)
4) Having to record Board Resolutions and manage a Shareholders register

The cost of running a Ltd. ccompany is more than operating as a sole trader but it isn't usually significant unless the business have a very low turnover; say less than £30k pa. Many limited companies are only setup because the director wishes to be a supplier to a customer who will only trade with a limited company. If this applies to you, you should just crack on with the company you have. I would recommend you find an accountant who will be able to help you maximise the protfitablity of your business and avoid falling foul of any of the tax laws.

Marcon

tacpot12 wrote: »

The advantages are:
1) Appearance of stability and propriety
2) Limited Liability
3) Ability to take contracts that require the supplier to be a limited company

Disadvantages are:
1) Liability for Corporation Tax Not necessarily worse than income tax
2) Liability to charge VAT once your turnover exceeds the threshold You would have to do this when self-employed once you reach the VAT threshold
3) Having to prepare and submit accounts to Companies House (As a sole trader you would only need to prepare and submit accounts to HMRC)Absolute doddle to do online using the template supplied by Companies House - no audit required for a small company
4) Having to record Board Resolutions and manage a Shareholders registerIf you are the only shareholder and director, this isn't onerous!

The cost of running a Ltd. ccompany is more than operating as a sole trader but it isn't usually significant unless the business have a very low turnover; say less than £30k pa. Many limited companies are only setup because the director wishes to be a supplier to a customer who will only trade with a limited company. If this applies to you, you should just crack on with the company you have. I would recommend you find an accountant who will be able to help you maximise the protfitablity of your business and avoid falling foul of any of the tax laws.

Lots of useful info: https://www.gov.uk/browse/business