Why do people register as businesses?
Discussion
Eric Mc said:
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.
Which brings us back to the question. Why do so many people set up limited companies when they don't have to?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.
Surprisingly there only appear to be just under 2 million active limited companies in the UK. It seemed to me that every third adult had at least one.
Is there any other people involved in these businesses? One reason to incorporate is that you might have a business partner or investor and may want to split ownership. It also makes things easier if you plan to sell the business on in future. Limitation of liability would be the main reason however I suspect.
I think lots of "people" think you have to register as a company , not realising you can be a sole trader.
As said some love the cachet being a well built director brings
Tax reasons is another , as said
Limited liability it's name as already said limits the liability . I know property developers who do each project under a new LTD so if it folds or has financial issues then it won't affect other developments
Being a sole trader has benefits and allows you to have more privacy
As said some love the cachet being a well built director brings
Tax reasons is another , as said
Limited liability it's name as already said limits the liability . I know property developers who do each project under a new LTD so if it folds or has financial issues then it won't affect other developments
Being a sole trader has benefits and allows you to have more privacy
When I went contracting I was told I couldn’t do it as a sole trader so set up as a Limited as I was told I’d keep more of my earnings than if I went through an umbrella. I wasn’t completely convinced but did it anyway.
I pay myself the bare minimum as salary to pay some NI but everything else I pay myself is treated as a dividend. At the moment I’m investing in training and travelling for work, which I’m putting against tax and I don’t seem to owe much tax at all yet.
Recently I asked myself if I could set up a bike to work scheme as fancied a gravel bike but I told myself I would be better advised to save up for a new kitchen. What a miserable b
d. I was tempted to leave myself a bad review on Glassdoor.
And I style myself Consultant if I call myself anything, rather than Director.
I pay myself the bare minimum as salary to pay some NI but everything else I pay myself is treated as a dividend. At the moment I’m investing in training and travelling for work, which I’m putting against tax and I don’t seem to owe much tax at all yet.
Recently I asked myself if I could set up a bike to work scheme as fancied a gravel bike but I told myself I would be better advised to save up for a new kitchen. What a miserable b
d. I was tempted to leave myself a bad review on Glassdoor. And I style myself Consultant if I call myself anything, rather than Director.
Dr Jekyll said:
Which brings us back to the question. Why do so many people set up limited companies when they don't have to?
That's the relevant question. When you decide to go into business on your own account, there is no legal requirement to do so through a limited company. There are some advantages in doing so - mainly in regards to liability and separation of personal assets from the business. For many years there were significant tax advantages in operating through a limited company but these have been seriously eroded in recent years.
When I was a business banker, we saw a lot of sole traders register as ltd companies- lorry drivers were the favourite, as their employe...er....contracting company could not keep them as sole trader for more than 2 years without employment rights, which didnt happen if they wers ltd companies
fesuvious said:
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.If you want to borrow a large amount the lender can and will take as charge against a privately held asset.
Landlords may still insist on a personal name and/or personal guarantee on a lease
Etc.
It doesn't mean a fat lot.
What it DOES mean however nowadays is that nimrods can fleece suppliers, run up unsecured debts, manage a company terribly then go bust and walk away
Only to start back up 24 hours later.
Which winds me the f
k up as a point of principle.
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?
What about the people who have a visibly successful business......
But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- fk all!
I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as fk surely!
But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- f
k all! I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as f
k surely! m3jappa said:
What about the people who have a visibly successful business......
But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- fk all!
I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as fk surely!
Some people set up a LTD company for particular contracts then stop using it. It doesn't cost much to leave it dormant in case they want to use it again. I know people working as conventional PAYE employees who still maintain companies from their contracting days.But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- f
k all! I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as f
k surely! Ari said:
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).
If you are making pension payments it's very tax effective to do it via a PSC/Ltd Co.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).
Every young person under a certain age seems to have “their own business” and in reality it’s just a little bit of nothing. The likes of the apprentice make it sound like everyone needs to have their own business by the time they are 21. If you have ever interviewed one of these people for a job you will soon be wondering what the fate of business will be in 20 years time.
And another advantage...depending on what stage in life you are, when you eventually close down your limited company you only pay 10% tax on the assets (in particular cash in the bank) you take out. So assuming the business is generating cash and building up cash in the bank then it’s an effective way to save for retirement.
craigjm said:
Every young person under a certain age seems to have “their own business” and in reality it’s just a little bit of nothing. The likes of the apprentice make it sound like everyone needs to have their own business by the time they are 21. If you have ever interviewed one of these people for a job you will soon be wondering what the fate of business will be in 20 years time.
I remember about 20 odd years ago a businessman saying he hoped that one day schools careers advisors would say 'have you thought of becoming an entrepreneur?' Absolutely unthinkable then, so in some way the current situation is an improvement. The issue is that so many people think starting a business is about forming a LTD company and shouting at people, rather than about serving customers.m3jappa said:
What about the people who have a visibly successful business......
But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- fk all!
I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as fk surely!
A company I'm involved with does this . It turns over 1mil + but the limited accounts show bugger pretty much 0But
The limited company accounts for those companies show zero, nothing at all, dormant accounts and basically look like they aren't trading. other directors info also shows the same. All directorships they hold show the same- f
k all! I have come across this a few times when seeing someone successful and feeling a bit nosey wondering just how well they are doing. Unless they are also trading as a sole trader but then why the limited company in the name the business appears to be trading in?
Must be dodgy as f
k surely! This is as the company is run as sole trader,the ltd was setup to stop someone else registering it and for the occasional contract if needed, it's there .
No dodgy reason (I can't talk for others who do this) , our website or any other correspondence makes no reference of the ltd , so we don't pass off as it
It has led to some panic'd phone calls when people we are doing business with have a look on companies house and think we are a front!
tvrolet said:
And another advantage...depending on what stage in life you are, when you eventually close down your limited company you only pay 10% tax on the assets (in particular cash in the bank) you take out. So assuming the business is generating cash and building up cash in the bank then it’s an effective way to save for retirement.
Only if the winding up of the trading activity qualifies for Entrepreneur's Relief for Capital Gains Tax. There are fairly strict criteria for this relief which is chiefly aimed at those who are retiring. So, for younger people, it may not be available. craigjm said:
Every young person under a certain age seems to have “their own business” and in reality it’s just a little bit of nothing. The likes of the apprentice make it sound like everyone needs to have their own business by the time they are 21. If you have ever interviewed one of these people for a job you will soon be wondering what the fate of business will be in 20 years time.
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.Sheepshanks said:
craigjm said:
Every young person under a certain age seems to have “their own business” and in reality it’s just a little bit of nothing. The likes of the apprentice make it sound like everyone needs to have their own business by the time they are 21. If you have ever interviewed one of these people for a job you will soon be wondering what the fate of business will be in 20 years time.
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.Gassing Station | Business | Top of Page | What's New | My Stuff