Are you limiting yourself by not incorporating your business?
Below are a few basic facts to consider when thinking about incorporation:
Advantages of Incorporation
- Limited liability status can provide protection for the owner’s personal assets against commercial risk;
- In some sectors of business, the word “Limited”, may enhance status of the business and give the impression of a larger firm;
- You can avoid National Insurance Contributions on profits by paying dividends;
- For businesses with annual profits of over £45,000.00, tax savings can be significantly more, when profits are retained in the business for expansion;
- Although you will have to pay corporation tax on profits of the business, this is much less than the 40% income tax rate and 1% NIC Payable on unincorporated profits above the basic rate band.
Disadvantages of Incorporation
- Tax charges on company cars, depending on the type and price of car and amount of business and private mileage;
- Reduced Inheritance Tax relief for assets owned personally but used by the company;
- Potential double tax charge on the sale of the business – if the purchaser does not wish to buy the shares;
- You will be required to file accounts to companies house each year, therefore the financial status of the business will be open to the public;
- If the turnover exceeds £6.5m the accounts will require an audit;
- Companies have more administrative burdens, which will result in increased professional fees.
Professional advice should always be sought in all cases before a decision is made, so please contact us on 01909 512 120 or email@example.com, for advice or support.