Lots of 'Working capital' or Cash in a business
Discussion
It's for a number of reasons:
(1) Paying the corporation tax bill when it arrives
(2) Not needing an overdraft with the bank
Because if you have an overdraft with the bank then they can decide to stop lending at anytime.
If they do decide to recall the loan/overdraft then at that point the business will be insolvent overnight.
If you want to run the business yourself, rather than as a junior member of the team run by your bank manager you keep working capital in your account.
(1) Paying the corporation tax bill when it arrives
(2) Not needing an overdraft with the bank
Because if you have an overdraft with the bank then they can decide to stop lending at anytime.
If they do decide to recall the loan/overdraft then at that point the business will be insolvent overnight.
If you want to run the business yourself, rather than as a junior member of the team run by your bank manager you keep working capital in your account.
Cash as capital increases the value of the business quite a bit too as per above.
Capital gains is 18% and if its your first business you are allowed up to £1M at 10% IIRC.
Compare that with your marginal rate of income and you will see its quite attractive to let it sit there if there is no better return elsewhere.
Currently loads of companies are sitting on cash piles. Some say to weather the second dip, others to service and repay debt etc
Capital gains is 18% and if its your first business you are allowed up to £1M at 10% IIRC.
Compare that with your marginal rate of income and you will see its quite attractive to let it sit there if there is no better return elsewhere.
Currently loads of companies are sitting on cash piles. Some say to weather the second dip, others to service and repay debt etc
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