Sole trader to Ltd

[Paul Smith]

Be a little careful, as you need more detailed accounts once LTD, so your accountant will gain from your going LTD.

 

My accountants do everything including compile and publish my accounts, think its just about the same price as a sole trader.

[Doug Blease]

Thanks guys, this is all good info. Keep it coming.

[Dave the dog]

Thanks guys, this is all good info. Keep it coming.

 

Have you asked the bank about this change to Ltd ?, have you got dicent assets? They might try and put you off if you havent.

[Mark Bolam]

Depends how big you are.

 

I have just gone in the opposite direction.

 

I've been Ltd for years, hangover from a different career when I made a lot more money.

 

The big advantage was not paying higher rate tax, worked on a nominal salary and corporation tax payable on dividends.

 

Going Ltd does mean spending more on accountants fees, as there is a lot more work to do.

 

If you are a one-man-band-with-subbies set up like me, and happy to stay that way, I wouldn't bother.

 

If you have plans for arb-world domination, go for it, the sooner the better.

 

Do yourself a favour though. Get some INDEPENDENT professional advice.

 

Good luck with it.

[Doug Blease]

Thanks,

 

Not world domination. Whats has happened is that I downscaled from small business owner, to employee four/five years ago. (Wanted to move back to Scotland/got a senior arborist job to facilitate the move).

 

Then decided to complete some education which the full time job wouldnt support. Therefore I left and became "Mr Freelance Aberdeen 2007". This has worked out really well with the help of my wonderful arb colleagues.

 

Now I am nearing the end of my degree and there is nothing I would like more than to use my new range of skills alongside my Arb exp and interest in sustainable forestry. Demand for my services is increasing with no advertising, so I am planning to go for it at the moment.

 

I certainly dont want to dominate anything, but more partnership working with forward thinking companies/organisations.

 

It makes sense to me that if I become a larger business, then LTD should be the way forward.

Scheduling another meeting with the accountant soon.

 

Thanks a million guys. Any other advice is readily accepted.

[Highland Forestry]

Doug..

Sounds like you are looking into doing exactly what I've just done.

 

There are benefits and pitfalls but in my opinion becoming Ltd is a good choice.. It offers you more flexibility than just being a sole trader, as far as tax and natonal insurance, as you can can pay yourself a modest wage and then at the end of the year your accountant can sort you divedends.

 

Some things to remember are that if you become Ltd, you need to submit your accounts to companies house once a year, and your accountant should be chartered to deal with a Ltd companies accounts.

 

Don't confuse Ltd with VAT - they are two entirley seporate entities.

You cant claim back VAT for 5 years by going Ltd.

 

When your turnover reaches the VAT threshold, your accountant should flag you up for VAT registration. After registration you can claim back VAT on all purchases for up to 6 months before the date of registration.

 

You're also supposed to have a corporate bank account for a Ltd company and the process for setitng up a new account for a Ltd company is not the simplest but you can do it quite easily.

 

I would suggest you speak to an accountant or a business advisor that is completley independent.

 

If it's helpful at all I could reccomend a good guy in Aviemore.

[Dave Martin]

You will be able to draw dividends as opposed to salary which will not be subject to NI and the company will pay Corporation tax on its profits. Also you will find it easier to lease vehicles and equipment as most finance companies prefer or solely do business with Limited companies.

[Doug Blease]

Matt, thanks.

Seems to be some confusion here about whether or not I could claim VAT on previous purchases. But I will find out asap from the accountant. I was going to go voluntary VAT registered if that makes any difference.

 

Thanks Dave also. Starting to get the picture now.

[dillsue]

A couple of comments on whats been said previously-

 

You dont need a chartered accountant to prepare Ltd co books- you can do it yourself if you want. If turnover is above a certain amount(£150K) then you have to have your accounts auditted by a registered auditor.

 

Limited liability is only limited if the directors(you I assume) have acted properly. If directors have been negligent/fraudulent in running the company then creditors can persue the directors as well as the company itself.

 

If the majority of your customers are VAT registered (ie not domestic) then register for VAT voluntarily. You should be able to get on what is called the Flat Rate Scheme where you charge VAT at the normal rate (17.5%) but pay the VAT man and agreed percentage that encompasses any VAT that you would have claimed back if you operated VAT "normally". I charge 17.5% and pay 10%!!!!!!!! Nice little earner and simple, as I dont have to keep any records or receipts for VAT being claimed back. Check out the flat rate scheme on the HMRC web site and you can self assess the rate you pay the VAT man:biggrin:

[Doug Blease]

Oh god dillsue your losing me a bit. Sounds good though. I have written that down in my notes to ask about a Flat Rate Scheme.