Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: wcs. on June 21, 2008, 11:40:07 am
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I am sure there are benefits to being Ltd, but for the one man band life is much more simple if you are just self-employed. I am and do not in any way feel threatened.
I know someone who went Ltd and they now have to employ a chartered accountant, their insurance is much more expensive and they have to be more rigorous with thier book-keeping etc. They still benefit from being Ltd, but their overheads have increased substantially (I think at least £1000 per annum) and it does take more of their time.
I do O.K. but feel no desire to boast how much I earn (more than some, less than others).
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not actually followed what you are saying ..but to my best knowledge (which is 18 yrs experience of top flight scrimming under my belt) I do not know of any s/e window cleaners going bust,how can they,there aint no major cash flow problems money is normally paid straight away or collected within 2 weeks of been cleaned ..no comprehend vous?
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I am Ltd and loving it! 8) Pay myself a top wage up to 35k a year tax free, going Ltd is a lot involved but the benefits are good, but it might not be for everyone, I would speak with your account before you went down this road
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There is always the danger of the tax man removing some of the benefits of being Ltd, e.g. in the Budget. Talking to your accountant is good advice.
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Andy
I am in London from this afternoon - rush job on for some media coverage on a store.
Will call you later on in week - could do with your angle on going LTD
Cheers
Rob ;D
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can someone explain LTD to me i aint a clue ??? ??? ??? ???
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can someone explain LTD to me i aint a clue ??? ??? ??? ???
It can be complicated or easy. It depends who is advising you.
Your accountant will probably want to make it sound very complicated and difficult (so you'll need to pay extra for his services!).
In a nutshell, A Limited Company is an entirely separate legal entity. It is not you.
You dont 'own it'
'It' isnt yours
You are an employee of the Ltd company (even if you own 99% of the shares in it)
'It' pays its own tax.
'It' has its own Public Liability
'It' can go bust....and leave you free of debt - just like if you bought shares in M&S and they went bust, the bailiff wouldnt chase you as a shareholder for debts.
'It' can pay you a dividend each year (which is taxed lower than PAYE)
'It' still has to pay tax on its turnover (so strictly speaking, Poleman is incorrect when he says he draws 35k tax free)
The simplest way to think of a Ltd company is your child turning 18. Legally, you are no longer responsible for them, (but in reality you probably still control everything they do!)
Do a quick google search or a 'wicki' search for the finer details.
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Andy
I am in London from this afternoon - rush job on for some media coverage on a store.
Will call you later on in week - could do with your angle on going LTD
Cheers
Rob ;D
Rob, give me a call any time, best after 5pm as I dont like to talk about what I get paid in front of my emplyees ;)
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'It' still has to pay tax on its turnover (so strictly speaking, Poleman is incorrect when he says he draws 35k tax free)
Yes the Ltd Company pays corporation tax, so the MD (me) does not pay tax up to 35k as that would be classed as a double take
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I don't get how becoming Ltd turns you into a business with a team and systems.
Your post is about becoming Ltd. Do a seperate post about business building.
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I run a limited firm. A word of warning. It is easy to become limited. Once you are limited its a big problem going back to self employed - I tried. It would have cost me a lot of money. I would have had to buy the the company's goodwill and assets blah, blah, blah.
If your a one man band, forget going limited. 3 or so years ago you were crazy not to be limited, you saved a bunch in tax. The government cottoned on to this "misuse" of a limited company. They are currently in the process of changing tax laws, it is now better to be self employed if you are a 1 man band.
It will cost me too much to go back now, unless the government really crank it up on limited companies.
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The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
Another obvious point is as a sole trader you own your job, with that come all the problems for example if you are of work due till ill health.
Companies or businesses are completely different they are systems. The owners of established companies don’t even have to be there. They employ an MD to run it for them.
There is no way even the most successful self employed window cleaner can compete with in any way to an average window cleaning firm.
Ewan,
Have to say I disagree with your post. I have no idea where your coming from :)
This team versus individual bit makes no sense to me whatsoever. In reality being limited really just matters when its time to do your books. In the business world being limited has the advantage of having a better perception, but as window cleaners I don't believe our customers really give a monkeys quite honestly. It doesn't effect them.
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The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
Another obvious point is as a sole trader you own your job, with that come all the problems for example if you are of work due till ill health.
Companies or businesses are completely different they are systems. The owners of established companies don’t even have to be there. They employ an MD to run it for them.
There is no way even the most successful self employed window cleaner can compete with in any way to an average window cleaning firm.
that is totally wrong, I used to be a one man band I used to go up against companies all the time, I won a fair share of the work. Are you a window cleaner Ewan ? :-\
Also while I am here, anyone can buy a limited company name ::) do a search, I know loads of people that run very big business' yet are not limited if what ytou say is true can you explain this to me I am not limited
Ian
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The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
Another obvious point is as a sole trader you own your job, with that come all the problems for example if you are of work due till ill health.
Companies or businesses are completely different they are systems. The owners of established companies don’t even have to be there. They employ an MD to run it for them.
There is no way even the most successful self employed window cleaner can compete with in any way to an average window cleaning firm.
that is totally wrong, I used to be a one man band I used to go up against companies all the time, I won a fair share of the work. Are you a window cleaner Ewan ? :-\
Also while I am here, anyone can buy a limited company name ::) do a search, I know loads of people that run very big business' yet are not limited if what ytou say is true can you explain this to me I am not limited
Ian
Ian, it’s not totally wrong at all it’s not even a little bit wrong. Just because you have and I hope continue to win work over firms. Doesn’t mean they can’t crush you if it was in there interest.
An extreme example would be if you went up against OCS for a contract of say one million pounds they could offer to do it for free pay the client for doing it! And OCS would still make a profit at year end.
As for saying you no people who run very big businesses and are not ltd. This is a fallacy, but does depend on your definition of big and not what is actually big.
PS. People aren’t ltd businesses are for good reason.
Ewan
Please don't insult my intelligence by saying about what my definition of big is I am not a silly little boy. You are word twisting.
As for crushing me buy doing work free to get the contract I do know what you are saying. My point was and still is you do not have to be a limited company to win contracts nor IMO does it make any diffrence as said before you can buy a limited company online.
Again I say what you put is wrong and yes even a little bit wrong not totally but still wrong.
Are you a window cleaner ?
Ian
p.s OCS I would say are not an average firm
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I am Ltd and loving it! 8) Pay myself a top wage up to 35k a year tax free, going Ltd is a lot involved but the benefits are good, but it might not be for everyone, I would speak with your account before you went down this road
the fact that you are an "employee" of your ltd compnany and your ltd company has to pay corporation tax how does this mean that your 35k salary is tax exempt??
as an employee should you not have to pay tax on those earnings? you may be able to pay yourself some of the profits from the firm tax free via a dividend at the end of the financial year but i would have thought that your earnings are tax liable.
I might be wrong here and i'm not saying that what i have said is right so if i am wrong could someone please explain why !??
greg
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An extreme example would be if you went up against OCS for a contract of say one million pounds they could offer to do it for free pay the client for doing it! And OCS would still make a profit at year end.
Why would they do that??? I'm sure that they didn't become a successful business by working for free!!!! ???
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I am Ltd and loving it! 8) Pay myself a top wage up to 35k a year tax free, going Ltd is a lot involved but the benefits are good, but it might not be for everyone, I would speak with your account before you went down this road
the fact that you are an "employee" of your ltd compnany and your ltd company has to pay corporation tax how does this mean that your 35k salary is tax exempt??
as an employee should you not have to pay tax on those earnings? you may be able to pay yourself some of the profits from the firm tax free via a dividend at the end of the financial year but i would have thought that your earnings are tax liable.
I might be wrong here and i'm not saying that what i have said is right so if i am wrong could someone please explain why !??
greg
Its a convoluted system. I'll try and break it down for you -
The Ltd company pays corporation tax. The Ltd Company pays its shareholder (you) a "dividend" at the end of they year. Thats your return on your shareholding. Just like M&S pays dividends each year to its shareholders.
Because the Ltd company has paid tax itself on that money then it can pay it out as a dividend to the shareholder technically tax free (but its your company and you've just paid corporation tax through the company so it is in no way tax free).
As you most likely will have no other income (because you work for the Ltd company) then you wont be hitting tax thresholds that would affect the dividend payout.
You claim the money once a year. You technically have no wages all year.
It isnt a way to get tax free wages. Its nothing of the sort.
It can be handy for staff and if you start hitting VAT thresholds. Apart from that, its just another expense to add to the list.
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thanks david
so essentially you dont pay tax on the same money twice. assuming polemans company (ltd) earns more than 35K profit a year (and he portrays that image!) then what happens to the excess profit if it cant be paid as a yearly dividend? is this then liable for higher rate corporation tax? and how can the "shareholder/s" receive it if not as wages? bit heavy for saturday night i know!!!!
thanks, greg
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Ewan,
Perhaps I am misunderstanding where you are coming from.
What did you mean by this statement?
Fact is you are more vulnerable if you are self employed.
This statement below is very misleading.
The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
Also this makes no sense. A sole trading company can be larger than a limited firm.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
No, I take it back. I don't think you know what your talking about on reflection ;D
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thanks david
so essentially you dont pay tax on the same money twice. assuming polemans company (ltd) earns more than 35K profit a year (and he portrays that image!) then what happens to the excess profit if it cant be paid as a yearly dividend? is this then liable for higher rate corporation tax? and how can the "shareholder/s" receive it if not as wages? bit heavy for saturday night i know!!!!
thanks, greg
YES you pay tax if your above 35k but the Ltd company pays about 20% corporation tax, so the tax man is not going to tax twice, I pay myself a wage below the personal allowance, which then I don’t get taxed and then I pay myself a dividend in respect of the fully paid shares of the company, which is from its profits, which my business is making a profit, and as long as I submit Minutes of a Directors Meeting each month (by law) then I won’t get taxed on what I get paid, I am looking into a stake hold pension at the moment and maybe a company car (not sure what the tax situation is )
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Ewan,
Perhaps I am misunderstanding where you are coming from.
What did you mean by this statement?
Fact is you are more vulnerable if you are self employed.
This statement below is very misleading.
The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
Also this makes no sense. A sole trading company can be larger than a limited firm.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
No, I take it back. I don't think you know what your talking about on reflection ;D
OK, Learn to read first ;D
Come on, you can do better than that. What did you mean by those comments I quoted? If you really can edudacte me, I'd really appreciate that :)
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Flogging and dead horse spring to mind ::) ;D
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The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
Another obvious point is as a sole trader you own your job, with that come all the problems for example if you are of work due till ill health.
Companies or businesses are completely different they are systems. The owners of established companies don’t even have to be there. They employ an MD to run it for them.
There is no way even the most successful self employed window cleaner can compete with in any way to an average window cleaning firm.
that is totally wrong, I used to be a one man band I used to go up against companies all the time, I won a fair share of the work. Are you a window cleaner Ewan ? :-\
Also while I am here, anyone can buy a limited company name ::) do a search, I know loads of people that run very big business' yet are not limited if what ytou say is true can you explain this to me I am not limited
Ian
Ian, it’s not totally wrong at all it’s not even a little bit wrong. Just because you have and I hope continue to win work over firms. Doesn’t mean they can’t crush you if it was in there interest.
An extreme example would be if you went up against OCS for a contract of say one million pounds they could offer to do it for free pay the client for doing it! And OCS would still make a profit at year end.
As for saying you no people who run very big businesses and are not ltd. This is a fallacy, but does depend on your definition of big and not what is actually big.
PS. People aren’t ltd businesses are for good reason.
Ewan
Please don't insult my intelligence by saying about what my definition of big is I am not a silly little boy. You are word twisting.
As for crushing me buy doing work free to get the contract I do know what you are saying. My point was and still is you do not have to be a limited company to win contracts nor IMO does it make any diffrence as said before you can buy a limited company online.
Again I say what you put is wrong and yes even a little bit wrong not totally but still wrong.
Are you a window cleaner ?
Ian
p.s OCS I would say are not an average firm
Never intended to insult you Ian, so I apologise if you were.
But I do know what I am talking about, what I wrote is true but comprehension is always going to be the crux of disagreement.
You are missing the point I am making between being a sole trader and a company/business.
Yes I am a window cleaner.
Been doing it a year now, so have at least one year’s knowledge on the subject. Have ten years knowledge of business.
How about you?
PS: OCS was a hypothetical. Point being one million is about half day turnover for OCS, how many years of turnover would that be for you!
Do the hypothetical with a local firm that’s in your area the principal still applies
Thing is I not a sole trader
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When you are quoting a big box of quotes , you know its time to go to bed ! ::)
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stick it under the matress or in a shoe box .... its much easier
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Ewan,
From your last reply to me I'm convinced there is a large gap in your knowledge. I strongly suggest you do a bit more research on the matter before misguiding people.
Please, if you feel otherwise, give me a structured argument as to why the quotes you made, that I have highlighted make any sense at all.
To be honest, I am of the opinion at this point you are trying the bullpoop baffles brains approach, and its not working. Your understanding of the subject seems flawed. Please prove me wrong by detailing the quotes you have made.
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A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
I dont understand this?
Even a sole trader can have employees, and therefore have a team. Whether you are limited or not is purely a legal position, it does not affect the actual work of window cleaning.
What I mean is, if you went limited tomorrow you would not suddenly be stronger because you are a "team".
Having a limited company means that your personal assets (ie house and car and savings etc) are protected in case the business fails owing large amounts of money. (limited = limited liability)
Window cleaning businesses don't have large amounts of stock etc, and rarely are able to build up large debts with suppliers (because window cleaning is a service, there is no physical product) therefore limiting your liability is probably not a big issue for most.
Sometimes, commercial customers will treat you more seriously if you are limited though.
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Spot on Tennet.
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There used to be more benifit about 2 years ago to being Limited. As far as I can remember, you could get your first 10K of divident out of the company completley tax free, good old Gordo got rid of that when lots of sole traders changed to Ltd to take advantage of that.
Insurance, someone pointed out it will be higher, doesn't have to be. A company I deal with for marine insurance quoted me the same price so long as I was the only person working for the Ltd company. Once I took on staff the price jumped by 100's.
There are advantages to being limited, the main one being dividents and the tax savings. However, you need to look carefully as your Accountancy fees will rise and may offset any gain you made in taxation. The reporting is more stringent too, you need to file accounts with Companies house every year and the penalties are high if you miss the deadlines. There is more red tape with being Ltd and with that more admin costs.
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The tax benefits are real compared to having a job or being self employed. This shouldn’t be the reason alone for going ltd.
A good way to look at it, as a sole trader if you compete for business against a company you will be up against a team. Teams are stronger than the individual.
Another obvious point is as a sole trader you own your job, with that come all the problems for example if you are of work due till ill health.
Companies or businesses are completely different they are systems. The owners of established companies don’t even have to be there. They employ an MD to run it for them.
There is no way even the most successful self employed window cleaner can compete with in any way to an average window cleaning firm.
that is totally wrong, I used to be a one man band I used to go up against companies all the time, I won a fair share of the work. Are you a window cleaner Ewan ? :-\
Also while I am here, anyone can buy a limited company name ::) do a search, I know loads of people that run very big business' yet are not limited if what ytou say is true can you explain this to me I am not limited
Ian
Ian, it’s not totally wrong at all it’s not even a little bit wrong. Just because you have and I hope continue to win work over firms. Doesn’t mean they can’t crush you if it was in there interest.
An extreme example would be if you went up against OCS for a contract of say one million pounds they could offer to do it for free pay the client for doing it! And OCS would still make a profit at year end.
As for saying you no people who run very big businesses and are not ltd. This is a fallacy, but does depend on your definition of big and not what is actually big.
PS. People aren’t ltd businesses are for good reason.
Ewan
Please don't insult my intelligence by saying about what my definition of big is I am not a silly little boy. You are word twisting.
As for crushing me buy doing work free to get the contract I do know what you are saying. My point was and still is you do not have to be a limited company to win contracts nor IMO does it make any diffrence as said before you can buy a limited company online.
Again I say what you put is wrong and yes even a little bit wrong not totally but still wrong.
Are you a window cleaner ?
Ian
p.s OCS I would say are not an average firm
Never intended to insult you Ian, so I apologise if you were.
But I do know what I am talking about, what I wrote is true but comprehension is always going to be the crux of disagreement.
You are missing the point I am making between being a sole trader and a company/business.
Yes I am a window cleaner.
Been doing it a year now, so have at least one year’s knowledge on the subject. Have ten years knowledge of business.
How about you?
PS: OCS was a hypothetical. Point being one million is about half day turnover for OCS, how many years of turnover would that be for you!
Do the hypothetical with a local firm that’s in your area the principal still applies
Thing is I not a sole trader
Doesn’t matter what you are Ian, if you are not a sole trader what legal base are you?
You have still not answered my previous question.
if you question was how long have I been running window cleaning near on 10 years now, if that was not your question please ask again and I will answer for you
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Cheers Ian that was my question. As I said I have only been window cleaning a year and I understand I still have a lot to learn.
I like to take the advice from those on the forum who have been doing window cleaning longer than me.
My strength in part is business, but I know I need to understand more about window cleaning before I commit substantial amount of money to this (my Mrs wont let me) (yet)
Ewan, please do not take what I put as he having a pop at you I was not, but I see so many people come on here and say simalar no experience to back up what they say, I am always open to learn anything new and that will help my company grow.
If you ever what a chat give me a call (I coud pick your brains at the same time as you clearly know about the other side of business) I will always help you out on the window cleaning side of things I am know expert on the accountancy side thats what I pay them to do ;D
My FA is Fantasic my ears are always open and if I can help you in anyway or others I always will, I never had any help when I started off so leant what I know be trial and error and today I still lean new things I am not silly enough to think I know it all.
Best wishes
Ian
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All I can say on this matter, as you all seem to go around in circles! Speak with you account, or do a Google, there is a lot of accounting forums out there as well! Do your home work! I went Ltd and more than happy as my accountant does all the work and I get on with cleaning windows, which is what I am good at
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Cheers Ian that was my question. As I said I have only been window cleaning a year and I understand I still have a lot to learn.
I like to take the advice from those on the forum who have been doing window cleaning longer than me.
My strength in part is business, but I know I need to understand more about window cleaning before I commit substantial amount of money to this (my Mrs wont let me) (yet)
Ewan, please do not take what I put as he having a pop at you I was not, but I see so many people come on here and say simalar no experience to back up what they say, I am always open to learn anything new and that will help my company grow.
If you ever what a chat give me a call (I coud pick your brains at the same time as you clearly know about the other side of business) I will always help you out on the window cleaning side of things I am know expert on the accountancy side thats what I pay them to do ;D
My FA is Fantasic my ears are always open and if I can help you in anyway or others I always will, I never had any help when I started off so leant what I know be trial and error and today I still lean new things I am not silly enough to think I know it all.
Best wishes
Ian
Cheers Ian, Might hold you to that :)
Your always welcome Ewan.
Ian
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as poleman says let your accountant decide for you if you should go ltd or not - remember its easy to go ltd - not so easy to go back to sole trader.
we are registered as a privately owned company, tax is simple (but still bloomin taxing - unlike the ad)
we don't need to worry about dividends etc although we do have the dreaded vat. anyone coming close to the vat threshold I'd advise them to go no further. Its a nightmare, it will cost you money for at least a year and is a right royale pain, plus you better make sure your books are in order because the VAT man is the dragon of government, he can literally frog march you out of your house and throw you in a cell.
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You are entitled to your opinion its no bull and I believe you are baffled. What would be better for you if you did your own homework?
::) I never came on here pretending I knew everything. You seemed to be making various (wrong) statements, which can serve to mislead people. I'm quite clear on why (I don't want to be) limited.
At this point a window cleaner on his own has no valid reason to be limited, in my opinion. The tax gains have been eaten away by the government, and this year will get worse.
The main benefit of being limited are as traditionally as follows:
1. the saving of tax and National Insurance contributions
The government seem to have taken it upon themselves to knock this one on the head.
2. enhanced standing in the business community
For a one man band window cleaner, I'd argue it doesn't matter.
3. ability to easily divide interests in the company in the form of shares between members of the company.
What members?
4. limited liability
When was the last time a one man band window cleaner incured big debts?
I have saved a lot of money being limited in the past, but if I could go back now, I would.
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hi poleman i am a ltd as well i have been a ltd 4 4 years now and i cant believe how can u manege 2 pay yourself 35 k for a year and tax free aswell no way i am a managing director and my wife is the secratary and our wages is £440 a mont each and our accounted say that is the best he can do how much is your turnover for a year man a few million ? lets be honest with ourselves please
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hi poleman i am a ltd as well i have been a ltd 4 4 years now and i cant believe how can u manege 2 pay yourself 35 k for a year and tax free aswell no way i am a managing director and my wife is the secratary and our wages is £440 a mont each and our accounted say that is the best he can do how much is your turnover for a year man a few million ? lets be honest with ourselves please :o :o
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This is getting silly, the decent posters with genuine info get shouted off.
You are to blame Ewan (again) you start a thread off asking a fundamental question, and give an opinion. Then when someone who's been through it posts you disagree and question their crediblity.
I suppose my ideas on limited were as vague as yours, but I do respect what joe and alan have said.
Expansion is something i'm keen on too, but with the credit crunch, collapse of the biulding industry, and steep rises in fuel and energy are making me consider my next steps with care.
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Ewan, I run a limited company. As I made clear.
I run a limited firm. A word of warning. It is easy to become limited. Once you are limited its a big problem going back to self employed - I tried. It would have cost me a lot of money.
I wish I was sole trader, but it would cost me too much to change my company from limited, back to sole trader status. I can't be bothered to explain why, this is getting boring.
Is that really that tough for you to understand Ewan? I've made it quite clear.
You should simply of posted on the forum, "could someone advise me whether I should become a limited company?" You would have saved yourself a lot of embarrassment.
You need to stop making statements about something you clearly don't understand.
The natural progression for a growing business will be to incorporate.
Just ask questions, and I'm sure someone will help you.
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hi poleman i am a ltd as well i have been a ltd 4 4 years now and i cant believe how can u manege 2 pay yourself 35 k for a year and tax free aswell no way i am a managing director and my wife is the secratary and our wages is £440 a mont each and our accounted say that is the best he can do how much is your turnover for a year man a few million ? lets be honest with ourselves please
If I said I take 35k in any of my post then sorry for misleading you (which I dont think I did) I looked at this just resently and The basic rate Income Tax limit is £34,600 for the 2007-2008 tax year. LETS BE HONEST WITH OURSELVES HERE :-* and if you dont beleave me, here is the facts ;) www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_4016453
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Again my notions on limited are vague...
But I did think the reason you went limited was to earn 34k on basic tax and pay similar low tax on the dividend recieved above this for being a director.
I didn't know there were any other benefits (one man band size), and to be limited on 200 pw seems a bit pointless.
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I believe you've been offered some very good insights into this and don't see why you can't take them at face value.
As soon as someone uses a word or concept you don't understand you get all defensive.
I disagree on one thing. You say you welcome the biz knowledge of wc's, well some do post very well on doing the job, but seriously overestimate the success and longevity of the businesses they have. They say they have been succesful for ten, twelve, fifteen years or whatever, and then they say things like they can't afford to buy a new van. It 's not a crime not to have a few bob, and at the other end none of us like those who ram their large earning down our throats.
I'm not talking about bragging or being modest, i'm saying that some of the guys who post advice on biz and use themselves as successfull examples can't see that perhaps they are not a success in biz terms.
All the ones I read and think 'cor I wouldn't mind some of that tend to be the ones who get the flak.
Maybe you're just a poor judge.
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in fact i'll give you a quick no particular order list of biz brains posters
M clean(every aspect) ww (organic growth,credit control) me (systems&strategy) Tenant, gordonswindows, joe, alan, pj,mick hay,all three mods......
There are quite a few, at a pinch i'd even put you on there Ewan.
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From my memory of being a limited co, de registered 4 years ago now. I was md, wife sec. Payed ourselves the minimum amount of wage each week so we payed nics, if you dont pay them then you are in the clarts when you come to retire. So you then pay tax on that wage, which was just pennies, but you payed higher nic's as the company pays nic's for the employee (which you are weather md or not) and the employee pays nic's.
trouble is you havent payed your self enough to live on..well not much of a life any way, so you pay yourself dividends. I did this every month as financialy needed to. But you do or did then, get taxed. I think at the time it was just 10%, then there was coperation tax on top of that as it was a profit so you were paying about 20% in all. But you were not paying NIC's on those dividends.
the downside was the added responsibility. No dipping into the takings for a mars bar on ther way home as that is the companies money. You need buisness account, chartered accountant, send your tax (PAYE and nic's in every month (May get away with quarterly). But you need to be a far more stringent book keeper and are more likly to get investigated and you have to account for every penny.
Personaly I found it a lot of hassel after a days work and dont partiqularly miss it. However if the takings get to a certain level then I'm sure the accountant will recomend otherwise, but he is a good mate and is not that interested in a Florida holliday at my expence.
Nothing wrong with being a sole trader, get the missus on board and be a partnership and split the money, then you will also save tax.
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From my memory of being a limited co, de registered 4 years ago now. I was md, wife sec. Payed ourselves the minimum amount of wage each week so we payed nics, if you dont pay them then you are in the clarts when you come to retire. So you then pay tax on that wage, which was just pennies, but you payed higher nic's as the company pays nic's for the employee (which you are weather md or not) and the employee pays nic's.
trouble is you havent payed your self enough to live on..well not much of a life any way, so you pay yourself dividends. I did this every month as financialy needed to. But you do or did then, get taxed. I think at the time it was just 10%, then there was coperation tax on top of that as it was a profit so you were paying about 20% in all. But you were not paying NIC's on those dividends.
the downside was the added responsibility. No dipping into the takings for a mars bar on ther way home as that is the companies money. You need buisness account, chartered accountant, send your tax (PAYE and nic's in every month (May get away with quarterly). But you need to be a far more stringent book keeper and are more likly to get investigated and you have to account for every penny.
Personaly I found it a lot of hassel after a days work and dont partiqularly miss it. However if the takings get to a certain level then I'm sure the accountant will recomend otherwise, but he is a good mate and is not that interested in a Florida holliday at my expence.
Nothing wrong with being a sole trader, get the missus on board and be a partnership and split the money, then you will also save tax.
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Google search engine is a wonderful thing
I think this says it all
www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm
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de registered 4 years ago now
Clive,
How much cost and hassal was involved in the process. Can anyone else shed any light?
I have been told the accountant will have to value my business, and I will have to pay for the goodwill. Plus the assets. Effectively buy the business. Scared me off. I'm just wondering how much cost and hassal it is in real terms.
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Google search engine is a wonderful thing
I think this says it all
www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm
So on that basic I am saving about 4k a year! being Ltd thats fine by me :)
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Everyone seems to moan about when you become LTD your accountant costs go up??
so what if its saving you money and you claim your accountanting costs in the business its money well spent if you ask me ??? .
I would rarther pay my accountant to work for me helping me paying workers tax,ni, and the same for me than paying the tax man.
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Google search engine is a wonderful thing
I think this says it all
www.whitingandpartners.co.uk/content/company_v_sole_trader_tax_comparison.htm
A few things to bare in mind.
That corporate tax will soon be 22%
Most people are capable of doing their own books self employed, doing them limited is a totally different ballgame. So you may want to take accounts costs off your saving.
The average window cleaner in the u.k. net profit is around 15k. Probably more on this forum, granted. I think more professionally minded people are here than your average sample of window cleaners.
So in conclusion, you need to be earning very good money to make limited worthwhile. Not worth it for your average one man band. Well worth considering if your making good money though (and declaring it).
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Being ltd is very different in many ways, the more you can comprehend this, the better chance you will have at making it a success.
Tax was one of the reasons I went Ltd, and yes you don’t take it lightly going Ltd, but do I stay awake at night worrying about it, no way, my accountant does all the paper work, I just give it the once over and sign
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Jpoe.
At the time we were running a small colliery. I had all the mens PAYE to do sort out holl pay and VAT. Its not much in the scheam of things. But I am more of a practical bloke than an office worker and I found it a lot after a hard days slog. It may work for you Just I dont miss it.
Maybe its an ego thing in some cases having co ltd on the van (no offence to anybody). During my time I worked for 2 brothewrs. Ones pit was a ltd co the other was always a sole trader and now I know why he was. BVut just investigate and do what you think is right for you. If the accountants bills are higher well may be you will be spending 1k to make 3k in which case its worth it.
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Sorry about bring this post back, but its important one to consider
I use business forums and the same post came up on there www.ukbusinessforums.co.uk and this was posted which really gives a good insight
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There has been a wealth of posts on this subject, some giving excellent advice and some giving not so good advice.
I am not sure what mine falls under but will give you my thoughts.
First things first, consider the IR35 question before moving on.
Once satisfied, tax considerations.
Currently, on annual net profits of £50,000, the company option will save you up to £3437 per year in tax. (I am working on the basis of personal allowance salary balance dividends)
Differential pension treatment between that of a company and as a sole trade or partnership will also benefit you.
So in tax terms it first appears to be a no brainer.
Unfortunately there is a lot more to consider.
If you go limited then your accountants fees will most likely rise by iro £1,000 compared to a non incorporated trade. This will reduce the tax gain.
If you run a car through the business then depending on the car you drive this will also have a significant impact on your tax bill. An older car would mmost likely be more attractive through a limited co - a gas guzzling 4x4 would be much more beneficial running through a sole trade or Partnership.
Tax credits can be adversely affected by your choice due to dividends being grossed up - so exactly the same actual income would be treated differently for tax credits and affect the amount received.
Corporation tax rates / income tax rates - The former is rising, the latter is falling.
This government has moved the goalposts with regard to taxation of small companies more in the last five years than in living memory - who knows what is next? Income shifting will be in in some shape or form in one year, and don't rule out NI on dividends for close companies (once the election is out of the way, of course)
And once you have incorporated and got all of the reliefs then you won't get any more, or find it as easy, to go back the other way should the above come to fruition.
Then there is all the other stuff that is always bought up:
Limitation of liability - How important is that to the business?
Perception - How important is that to the business?
Administration - How good are you at it?
Directors Duties - More onerous than that of a sole trader
Loss relief - Important consideration
Associated companies - If so could increase the company tax rate.
Profit extraction - In particular dividend paperwork must now be watertight and can only come from profit.
Critical illness cover - Los salary / high dividend, are dividends taken into account by your insurers? If not could be a nasty surprise when you most need the cash.
The trouble is that a lot of advice given is to go limited due to the immediately apparent tax advantages of low salary / high dividend, and people are quick to take it up due to them naturally wanting to retain more of their hard earned profit. Yet many of the above points are not always considered and they need to be.
Don't get me wrong - my opinion is that the limited company route remains an attractive solution to many, but those who decide to go into it should do so with their eyes open and aware of the full facts. And what suits one doesn't always suit another - there is no standard answer without knowing the full facts of someones business, and even their personal traits.
Don't make this decision lightly.