Hi,
I'm employed part time (Health service) and my plan is to continue to work for 12 - 18 months whilst my new Accountancy business venture takes off. My initial thoughts were to set up as a sole trader in the first instance, but I'm actually wondering if I'd be better setting up as a Ltd company from the off?
I've done some searching and there are lots of articles on sole trader v ltd, but not so much on if you're also still working.
Any pointers gratefully received.
Replies (6)
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Not so simple
The answer is not simple, it depends on your circumstances (for example how much you currently earn and what the income from your new venture will be) and it makes sense to go to an accountant in order to have the situation assessed for your circumstances and to understand all the pros and cons of a ltd company.
Self-confidence
The brutal answer to this question is yes. Your clients are likely to ask re their businesses so you need to be able to provide an answer. Which is where my issue is, if I am wishing to set up as an accountant, shouldn't I be able to work this out for myself?
But it sounds like you are most of the way there already. You understand the likely tax consequences of the two options. You also understand the ability to keep profits in the company until such time as taking dividends would not attract higher rate. Basic tax planning to be sure, but tax planning nonetheless. I would guess you are also aware of the non-financial pros and cons of a company, such as limited liabiilty and benefit in kind issues.
So maybe you just need to take a step back, and try to appraise your calculations as if you were to present them to someone else. Would you advise them to incorporate in your circumstances? Do the other aspects affect the decision at all? My guess is that you will find you know the answer all along, and just need the confidence to make the final step.
Possible deferment
Whilst Cathy R is quite right to make sure it is not forgotten, deferment is possible. The Class 1 NIC paid through the ongoing employment should be enough to meet the requirements for this. You would need to apply for this deferment though, it is not automatic.