Having made the decision to be your own boss, one of the first considerations is to decide the best legal and taxation structure for your enterprise. The most suitable structure for you will depend on your personal situation and your future plans and we would always advise that you sit down with a professional advisor to discuss your individual circumstances as the decision you make will have repercussions on the way you are taxed, your exposure to creditors and other matters. The possible options you have are outlined below - please click on each link for more information - and we would be happy to discuss these with you in person at a free initial consultation. Please contact us to arrange this.

For many people the first question they ask is “will I pay less tax as a sole trader or Limited company?” Although the tax savings are not as high now as they were a few years ago, the following table shows that there are still savings to be made by incorporating your business and that, depending on your income, these can be quite substantial:

There are however many other factors to consider not least being the fact that the government has changed how small companies are taxed numerous times over the last 10 years and there will no doubt be more changes over the coming years which may remove the reduced taxation benefits altogether. Once you have incorporated it is quite difficult (and potentially costly) to disincorporate.

Other matters that need considering when starting a business include:

• Timing of tax payments
• The profit or loss profile of the business over time (particularly with regard to use of losses and lower early year profits)
• The tax costs of running a car, that is also used privately, within the business
• The more generous corporation tax deduction regime for purchased goodwill, research and development costs, private use of mobile phones and recovery of sub-contractor CIS deductions
• The tax and timing aspects of 'exit routes', including gains on substantial shareholdings
• Eligibility to Child Tax Credits
• Litigation (including claims relating to Health & Safety, insolvency and commercial matters) protection
• The importance of keeping financial results and other business information confidential,
• Image and credibility in the marketplace (including when seeking credit from a new supplier)
• The additional administration work and professional fees (startup, ongoing and exit) associated with trading as a limited company
• Keeping personal finances separate from company finances
• Pension and personal mortgage issues
• Motor and General insurance considerations

For a concise summary of the main differences other than taxation between sole traders/partnerships and Limited Companies please see here