Is it more beneficial to be a Ltd company?

Is it more beneficial to be a Ltd company?

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I'm in the process of setting up a new business to earn a 2nd income. My main employment is PAYE and my salary is £25,500. My new business will probably turnover approx £10k p/a.
I'm attracted to setting up as a limited company to enjoy the limited liability that offers, but I'm not sure what will be the most advantageous from a monetary / tax point of view.
My wife can be a partner in the business if desirable and she earns £15,000 in her PAYE employment.
The business will be run from home, so no business premises / rent etc to be taken into account.

Any help and advice greatly appreciated. Thank you in advance.

Replies (3)

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By Manchester_man
20th Sep 2014 20:23

Supposing we say, yes, a company is the best way forward. You're going to need an accountant, unless you have sufficient software and knowledge to do it yourself. Therefore, my advice is, get one now, and ask him the above question.

I'm not being awkward btw. You will certainly benefit from seeing an accountant and most offer a free initial consultation. Your above question will probably be beyond what is covered by an initial free chat but would you offer your product / service for free?

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Teignmouth
By Paul Scholes
21st Sep 2014 00:37

Refreshing to hear...

someone mention using a Ltd Company because they want limited liability, all you ever hear is "what tax & National Insurance can I save?".

Anyway, if you really want, and need, Ltd liability, ie there's a significant risk of some personal loss, then yes, get some professional help and set it up.  However, unless you are planning on decent growth, ie to £20K - £30K in a couple of years, then you will probably find the cost and red tape of a Ltd Company is not justifiable for "only" £10K.

Obviously this space is insufficient to give us your full history but, from what you say, there's no real tax or NI benefit from starting as a Ltd Company, and so, subject to the Ltd Liability issue, you'd be better off starting the business as self employed and adding the income and expenses to your personal tax return.  The other benefit of this approach is that it tests the business so, if you have to pack it up you just stop, whereas, as a Ltd Company, there would be more red tape.

For general info on all this, unless you've already been there, it's worth a surf of HMRC's Starting a Business and Companies House Guidance and, if there's specific stuff you're not comfortable with then re-visit here and/or pay for some professional help.

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By User deleted
21st Sep 2014 01:07

I would add ...

... if it is the type of business that will build up significant business goodwill, i.e. the business could be sold on for much more than the balance sheet value and is not reliant on personal goodwill, i.e customers will still use the business if you don't own it, the there are some good tax advantages for starting out as a sole trade/partnership, building the goodwill and then incorporating.

I realise this probably not relevent to the OP, just add it for completeness in case someone else reads it who it may be useful to.

As Paul and Manchester say though, see a professional to make sure you do what is best for you.

 

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