I have been reading back through lots of the older posts on this forum and other similar forums and there are lots of posts about Ltd Company v Sole Trader.
What is confusing me is when is it not a good idea to opt to use a limited company over a sole trader, as I can't see any negatives apart from the fact that you have to file with both Companies House and HMRC.
From my basic tax knowledge and the posts i've read, most people use a limited company to save on NI and also to have the limited liabilty should anything go wrong in the business.
Any opinions would be great as I feel like i'm missing something.
- cost of forming the company - extra burden in terms of filing stat accounts, ct return, annual return - increased accountancy fees - lenders my ask for a personal guarantee against borrowing's - loss of privacy because accounts are a matter of public record - could actually be more expensive in terms of tax liabilities depending on profit made.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
If you want to take money out of a ltd co it either has to be salary and taxed or dividend. Sole trader can take money as and when they need it and treated as drawings. car provided through a ltd company is a benefit in kind and taxed. Car in a sole trader business you add back a % for private use - probably more tax efficient. Ltd cos come more into their own once income is into higher rate tax although there are tax savings below as well. Depends on clients lifestyle and attitude to money and admin !!
Having a Ltd company does cost more money to run and you have more paperwork to deal with, you should really only need to have a ltd company if your turnover is over a certain about then it can be more tax efficient for the owners.
As above - and some people don't have the understanding to run a limited company, they think the money in the bank account belongs to them. It doesn't, it belongs to the company. See here for a horror story.
