[AquaMagic]

Hello im looking for some advice please.

Me and my father are setting up a carpet cleaning business and wondered if anyone could offer advice with regards to bieng Sole Traders or becoming a Ltd Co, what are the pro's and cons of each and are there any pitfalls i should watch out for. My over question would be about becoming VAT registered i believe you can do this even if not required, are they any advantages of this other than the obvious "more credible" image.

Id like to say thanks in advance to anyone who may be able to offer help.

Many thanks

Dene

[cleaning co]

hi, sole trader to start with u dont no how much work u gooner get yet for starters u might not not be even trading in anymore in 6 months( hope u are mind) plus y would u want to charge custys vat and pay vat when theres no need ? all vat makes is a colleter of taxs for tax man ok u get vat back on a van and eqp but u make nothing outer jobs, plus £200 to reg company hav bank account in company name, hav secertery ,pay yourself wages and tax as u be on the company books etc etc , nah c how it gos first in my opion
all the best gary

[therapist]

there is really no credibility advantage, in being Vat registered, or Ltd liability, but, if your turnover exceeds 54k per annum, you will become legally liable for Vat.

You don't have to register immediately and you should seek out a reasonable accountant to advise you , but do shop around.

r m

[Phil Marlor]

Why would anyone want to be VAT regestered if they didnt have to be. A domestic customer certainly wouldn't want you vat regestered and gives you no credability whatsoever.

I have been both and I know what I prefer, the 17.5% in my Bank.

Rgds
Phil

[AquaMagic]

I was told that some times to get some commercial work you need to be VAT registered, but i agree about the part regarding 17.5% in my bank, thanks for the input, keep it coming its all usefull.

Kindest regards

Dene

[andrew chrysler]

If you are aiming for commercial work, you do better to be vat registered, your customer claims back the vat so the £117.50 you charge him only costs him £100

Where you win is that you claim back the vat you spent on your van and equipment, and the vat on petrol and chemicals.

So your overheads are only 82.5% of what they would be.


If you are aiming for mainly domestic work, avoid vat like the plague..... it's just extra income tax


Limited Companies may have tax advantages..... talk to a Chartered Accountant for some impartial advice.

I am a Ltd Co and VAT (but I have to be because of turnover) but it has never been a problem


And no..... you can't have two companies (1 vat and 1 non vat) and give the commercial work to one and the domestic to the other.... HMRC don't like it at all!

[BRSL]

Dene

weve been going about six months now and the only thing I regeret is being VAT rego'ed

as your just starting too, that 17.5% could be nocked off the job for better value for money "not discounted" to keep you that bit more competitive  

James

PS never had a commercial job inquire about us being VAT rego'ed before

[HQCS (John Kastrian)]

Just for the record,the current vat limit is £60,000.
You mention that you and your father are setting up together,so you would not be sole traders but a partnership.
this would ensure that you both get all tax allowances etc,and for  income tax purposes (22%) any profit  your business makes would be split equally between the two of you.
Don't forget you will be liable to pay class 2 nat insurance, plus class 4 nat insurance (8%) on your profits.
Vat-Avoid it if possible.
John.

[Andrew Briscoe]

 I think you are right about the vat limit being 60k.
as asole trader you cant split your business into 2
ie one vat and one not, but if you took on a partner
eg wife. for one business and ran other company yourself
then i believe you can charge vat from one and not the other
as they are then seperate.
as a ltd company the buisiness pays 19% tax it in turn
pays you abasic wage of 25k for example plus a dividend upto
 what you reqire this not being taxable as company has already
paid. there is also a scheme where you dont pay tax on your
fist 10000 pounds, this basically saves you accountancy fees.
 this is according to my accontant who i spoke to on monday
as i am having to register for vat and become a ltd company.

correct me if i or he is wrong------------ andrew

[John Kelly]

Contrary to popular believe it is possible to have 2 businesses, 1 vat registered and 1 not.
I is a sole tradership. the other is a limited company which is  a stand alone entity of which you are an employee (director).
Personally if starting up I would avoid both vat registration and a ltd company. Being a limited company means you have to run a payroll scheme even if it is just for the directors. Also the accounts side is much more invovled with subsequent much higher fees.

[AquaMagic]

OK looks like the common consenus is

Start as Soletraders/Partnership
Dont bother with VAT
Look becomine LTD later down the line if need be.

Many thanks for everyones input.

p.s Can oneone recommend a good porty as a back for our truckmount i have a budget of aroud £750

Many thanks once again

Dene

[homenclean]

Go Ltd, get a good accountant and be canny about the way you operate. Been Ltd gives you better tax options, if your wife or mum doesnt work list them as directors and utilise their tax allowances, dont draw large incomes draw dividends, keep your vehicle in you name claim millage allowances 40p per mile soon adds up. Remember you are also protecting your assets.
If you have already bought your equipment introduce it into your Ltd co, the company will then owe you the value of the equipment.

John
1st impact ltd

[JS2]

Hi Friend

Becoming Ltd gives you 'legal separation' from the identity of the business, providing you act responsibly i.e. within the law.  Being a sole trader makes you and the business the same legal person.  If you feel that the risks associated with running your business could threaten your personal assets, then there's a case for going Ltd. Co.  However, this involves Registration, some annual filing of information (the level of which depends on your turnover) and a complicated Corporation Tax return that you will probably need professsional help with completing.  There is a different taxing principle and a dividend aspect (which since 2004 is less generous that it had been).  Also, with Ltd Co. it's harder to shut up shop if you decide enough's-enough.

If it's the risk factor that attracts you to Limited Liability, then why not consider the simplicity of Sole Trader (e.g. unlimited liability) and carry suitable insurance to cover yourself ?  But please, ensure that you minimise the risks by undertaking suitable training and exercising care and attention in the jobs you do.

I hope all of this helps, but in the end please understand that it's your decision.

Good luck

Pete (JS2)

[Ian Gourlay]

The biggest Risk in Carpet Cleaning is buying the equipment and Van

Placing Adverts in Papers Yellow Pages BT Directory Leaflet Distribution Costs  Marketing Course etc.

Then it does not produce results


Your paying out X a monthand only Bringing in Y.


Would being Limited protect you

Is it ethical to expect other people to stand your misfotune


Would Advertising Companies give new company Credit


Would Leasing Companies take you on as Limited witout persona lGuarantees



Find the answer and then you will  know