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Here's one for you!

Here's one for you!

Hi all.

I'm presently employed (PAYE) but am about to start a business on my own, expected first year turnover of £70k, most of which will be profit.

The wife is presently non-earning (housewife) but i want to get her to help me out with a few thigs relating to the business.

The start up costs are negligabel (i have my clients in place) and will need to spend the first few months incomings to continue to pay the mortgate, bills, etc.

My feeling is to start up as a limited company, with me as the only shareholder/director and employing the wife. 

What is the best way to deal with the first few months incomings - can i treat them as dividend? - what are directors loan accounts?

My plan is to go see a chartered accountant but i would just like an idea of the issues before i do that.

thanks for your time


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28th Nov 2012 00:40

Take the time...
To go and see a suitably qualified accountant now. They will advise much better than anyone can do remotely via forum.

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28th Nov 2012 07:33

Agreed .....

I have recently taken on a client who thought they would get started and then find an accountant. They had done very well and everything had been completed to the letter. I then pointed out that they had already lost about £3k through not registering voluntarily for flat rate VAT at athe start.

Don't delay ... go get an accountant. You will save their year's fees in the advice given in your first meeting.

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28th Nov 2012 08:43

Agreed, from personal experience

I launched my own business last year. Although I had worked as a tax specialist for 25 years, I still went straight to an accountant to help me keep everything in order. You have so many issues to consider that you will almost certainly cost yourself money (and many a headache) if you do not get the structures right from the outset.

Should you be a sole trader, a partnership or a limited company? That will affect what you earn after tax for the whole duration of the business. Registering with HMRC. PAYE. VAT. Companies House. Corporation tax computations and returns if you go for a limited company. Personal income tax returns. Returns of benefits and expenses. What sort of records should you keep? And so on.

Failure to consider all these issues from the start will leave you exposed to penalties on a large scale and will almost certainly cost you in terms of tax you just did not need to pay. It can be very complex and expensive if you set out as a limited company but then realise that you would have been better off as a partnership. There are economies of scale, as well - if you have never operated a payroll system, for example, it will take you hours to do all the work whereas an accountant or payroll bureau will do it for you at minimal cost, using their existing systems. If you simply help yourself to money from your own limited company, you are in tax trouble from the very beginning.

Above all, though, you will have better things to spend your time on. I have never been afraid to work hard but the last 18 months have been at a new level. You say that you have your clients in place, but you may wish to grow the business, with whatever marketing initiatives that demands. You will probably need phone lines, email addresses, a new bank account (which can be a long, long process in itself, even if you have a good existing relationship), business cards, headed paper, a website, an invoicing system, liability insurance - the list of issues just goes on. So many young businesses fail but you are in a good position with a secure and profitable income in place from the outset, so it would be a real shame if you did not get the structures right to give yourself the best possible chance of success.

Good luck, but don't skimp on the professional advice!



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28th Nov 2012 08:54

I want to know your business model!

£70k first year turnover, very little expenses!

Unless you are a contractor, this seems too good be to true!

Ps - consider giving a share to your wife as well as paying her a salary.

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28th Nov 2012 09:38

Ps Correction

make your wife PAY for her share(s) - don't give it to her

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to justsotax
03rd Dec 2012 09:35

PS correction query

Mouse007 wrote:

make your wife PAY for her share(s) - don't give it to her

Interested to know why you think paying for the shares is better than gifting them?

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By mbc
28th Nov 2012 12:22

Thanks all for the advice - it is much appreciated and probably just confirms what I thought was the right thing to do, but trying to scrimp on the outlays at this stage - the truth is i'm sure the accountants' fees are more of an investment than an expense for me.

I'll make an appointment!


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