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?
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.
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.
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.
IT contractors are usually required to work through a company, so it's either set up your own or use an umbrella company. The costs being pretty similar.
In the good old days it was common practice to split the dividends between husbands and wives and sometimes others to keep out of the higher tax bracket. Which you could only really do with your own company. Another advantage is flat rate VAT which can cover the costs of maintaining your company.
On the other hand umbrella companies only charge when you're working, mine on a weekly basis. So if you are 'between contracts' for a few months having your own company might be an unnecessary expense.
Why anyone sets up their own company when they can run their 'business' easily without one I don't understand, the 'wanting to call themselves a director' is probably why. Although why anyone thinks describing their occupation as 'company director' sounds anything other than dodgy I can't think. All the IT contractors I know who happen to be directors of their own companies describe their occupation as what they do. Project manager, software engineer, maybe consultant at a pinch. And calling yourself a 'managing director' when you have no staff to manage is a sure sign of the unhinged.
In the good old days it was common practice to split the dividends between husbands and wives and sometimes others to keep out of the higher tax bracket. Which you could only really do with your own company. Another advantage is flat rate VAT which can cover the costs of maintaining your company.
On the other hand umbrella companies only charge when you're working, mine on a weekly basis. So if you are 'between contracts' for a few months having your own company might be an unnecessary expense.
Why anyone sets up their own company when they can run their 'business' easily without one I don't understand, the 'wanting to call themselves a director' is probably why. Although why anyone thinks describing their occupation as 'company director' sounds anything other than dodgy I can't think. All the IT contractors I know who happen to be directors of their own companies describe their occupation as what they do. Project manager, software engineer, maybe consultant at a pinch. And calling yourself a 'managing director' when you have no staff to manage is a sure sign of the unhinged.
It's clearer if you call it 'incorporating' (which makes a limited company). 'Registering a business' is just telling HMRC that you're making some money doing something.
Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
Simpo Two said:
It's clearer if you call it 'incorporating' (which makes a limited company). 'Registering a business' is just telling HMRC that you're making some money doing something.
Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
4) Limited Liability. If you're a Sole Trader not a Limted Company everything you own is on the line.Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
Mr Pointy said:
Simpo Two said:
It's clearer if you call it 'incorporating' (which makes a limited company). 'Registering a business' is just telling HMRC that you're making some money doing something.
Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
4) Limited Liability. If you're a Sole Trader not a Limted Company everything you own is on the line.Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
Dr Jekyll said:
Mr Pointy said:
Simpo Two said:
It's clearer if you call it 'incorporating' (which makes a limited company). 'Registering a business' is just telling HMRC that you're making some money doing something.
Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
4) Limited Liability. If you're a Sole Trader not a Limted Company everything you own is on the line.Two reasons for incorporating. (1) possible beneficial taxation depending on how much you think you might earn (2) ego. Oh and (3) if you're dodgy and plan to go bankrupt.
Europa1 said:
Mr Pointy said:
4) Limited Liability. If you're a Sole Trader not a Limted Company everything you own is on the line.
This to me would be the main attraction.I stayed as sole trader for two reasons. First, my earnings were not high enough for long enough to make it worthwhile. Second, I had confidence in my abilities so never felt the need to 'protect' my assets. I had PI insurance for the first couple of years, but as I got my feet under the table I considered it superfluous.
Of course every business is different so 'YMMV' as they say.
Nobody registers as a business. There is no requirement to do so in the UK.
You probably mean "why do some people set up limited companies"? Thee answer is, because they can. However, a person running a business is not obliged to set up a limited company. They can run their business as a sole trader.
You probably mean "why do some people set up limited companies"? Thee answer is, because they can. However, a person running a business is not obliged to set up a limited company. They can run their business as a sole trader.
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