Sole trader or limited company?

alm721

Can anyone give me any pro's or cons to being a sole trader or limited company. My hubby has taken over his fathers business. It was previuously run as a partnership but fil has now retired. Hubby is currently running it as a sole trader but I've been wondering whether a limited company may be better as I understand there may be some tax advantages but I'm not really clear on it all. Turnovers is maybe around 350k profit around 40k ish (dont know if that makes any difference)
Thanks in advance for any help

newfoundglory

sole traders have unlimited liability, and therefore you are personally liable for the debts of the business.

limited companies prevent this, and the liability doesnt go beyond what was originally invested.

there is more expense involved in running a limited company (ie, accountants), and you have to pay corporation tax. In theory, you would pay yourself a very basic salary and as a shareholder take all the profits as dividends. the advantages being dividends which although are subject to being taxed, there is no national insurance to pay on them - which is a saving of 11%.

LittleVoice

newfoundglory wrote: »

limited companies prevent this, and the liability doesnt go beyond what was originally invested.

That is true as long as the shares are fully paid, if only partially paid the balance is still due.

gordonstights

I am a partner in a small business and we are now looking into becoming a limited company. We are having some advice about whether it will suit us next week, however in the mean time I read that (supposedly) you are considered a more credible firm (by your potential customers & suppliers) if you are a limited company.