Why do people register as businesses?
Discussion
Friend of mine's son, been to university and got a basket weaving degree so knows everything and is much clever than everyone else, apparently. He has a photography web site with a few half arsed what look like phone camera photos and some secondhand no name film cameras and rolls of film for sale that you can buy cheaper on Amazon and actually works in a shop or something.
After a year of bleating on Facebook that 'no one wants to pay proper photographers' I don't think he's done a single paid job and I doubt he's sold much. It amused me that he'd always refer to himself as a 'company director' but put it down to his need to try and be a 'big shot'. Then one day, after he banged on about his 'company' yet again on Facebook I looked it up and to my astonishment, sure enough, he actually has registered his 'business' with Companies House!
Today I noticed someone else, husband of a friend of a friend who I vaguely know, referring to his 'business'. This is a bloke who bought a secondhand drone a year ago, put a web site up advertising 'drone services', and judging by his Facebook page has never had one single job (lots of 'out practicing again today' type posts). During an idle minute, after seeing him refer to himself as a 'managing director' or some such, I looked him up. Sure enough, registered business with Companies House!
So am I missing something here or is there some special benefit to registering? I've been self employed for a decade and it's never occurred to me to register because I'm just some bloke doing work for people and getting paid for it, I'm not a 'company'.
I spoke to my accountant about it once and there seems to be some benefit to the business earning the money and paying less tax than a private individual (Corporation Tax I think), but you still had to then pay tax on it when the business paid you so you could get your hands on it, so didn't seem to be a huge amount to be gained. But even allowing for that, neither of these people is making any money so it wouldn't benefit them one jot.
I know one or two others in similar situations, one man bands doing very little but registered as businesses, it can't just be so that can refer to themselves as Company Directors on Facebook, can it?
After a year of bleating on Facebook that 'no one wants to pay proper photographers' I don't think he's done a single paid job and I doubt he's sold much. It amused me that he'd always refer to himself as a 'company director' but put it down to his need to try and be a 'big shot'. Then one day, after he banged on about his 'company' yet again on Facebook I looked it up and to my astonishment, sure enough, he actually has registered his 'business' with Companies House!
Today I noticed someone else, husband of a friend of a friend who I vaguely know, referring to his 'business'. This is a bloke who bought a secondhand drone a year ago, put a web site up advertising 'drone services', and judging by his Facebook page has never had one single job (lots of 'out practicing again today' type posts). During an idle minute, after seeing him refer to himself as a 'managing director' or some such, I looked him up. Sure enough, registered business with Companies House!
So am I missing something here or is there some special benefit to registering? I've been self employed for a decade and it's never occurred to me to register because I'm just some bloke doing work for people and getting paid for it, I'm not a 'company'.
I spoke to my accountant about it once and there seems to be some benefit to the business earning the money and paying less tax than a private individual (Corporation Tax I think), but you still had to then pay tax on it when the business paid you so you could get your hands on it, so didn't seem to be a huge amount to be gained. But even allowing for that, neither of these people is making any money so it wouldn't benefit them one jot.
I know one or two others in similar situations, one man bands doing very little but registered as businesses, it can't just be so that can refer to themselves as Company Directors on Facebook, can it?
Spanna said:
Pay yourself in dividends and get taxed at 7.5% rate up to £37.5k + current £11,850 (tax free personal income paid via PAYE).
That rather ignores the 19% of corporation tax surely?Either way, neither of the above are earning more than a few hundred pounds a year from their 'businesses', in one case I'd bet a fairly large sum that 'company' income over the last 12 months is a big fat zero.
There's no tax advantages if you're not earning anything to pay tax on.
Ziplobb said:
Some blokes get a hard on out of calling themselves company directors. The reality is they could not direct themselves out of a paperbag.
Some women get wet on calling themselves company directors. The reality is they could not direct themselves out of a paperbag.
I used to have to sit in front of them when I was opening business bank account for a high street outift. I can spot them a mile off - its my sixth sense.
That, I suspect, describes both cases above, but I did think that there must be a little more to it than that.Some women get wet on calling themselves company directors. The reality is they could not direct themselves out of a paperbag.
I used to have to sit in front of them when I was opening business bank account for a high street outift. I can spot them a mile off - its my sixth sense.
Interesting, thanks. So it seems to me that key advantages are:
More tax efficient income, possibly (seems that avenue is now mostly closed)
Limited liability if you (for instance) build a house and it falls down a week after you've sold it.
Ability to share the value of the business if owned by more than one person.
Ego. (Calling yourself a company director).
Well pretty sure 1, 2, and 3 don't apply as we're talking about one man bands with zero assets and zero income that (try to) offer a service with little liability (taking photos).
So guess it's just ego.
Out of interest, what are the downsides? What does it cost and what responsibilities does it come with?
More tax efficient income, possibly (seems that avenue is now mostly closed)
Limited liability if you (for instance) build a house and it falls down a week after you've sold it.
Ability to share the value of the business if owned by more than one person.
Ego. (Calling yourself a company director).
Well pretty sure 1, 2, and 3 don't apply as we're talking about one man bands with zero assets and zero income that (try to) offer a service with little liability (taking photos).
So guess it's just ego.
Out of interest, what are the downsides? What does it cost and what responsibilities does it come with?
Sheepshanks said:
If they have a decent go at it, it's good exerience for them and should make them useful employees if they're recruited into a PAYE job. Better than kids just doing bar work etc.
I think the 'decent go at it' is key there. I'm not sure banging a few mediocre photos that look like they've been taken with a phone on to a web site full of hyperbole about changing the photographic industry landscape and strutting about calling yourself a 'company director' on Facebook really qualifies! 
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