Private Limited Company question
Discussion
I do not know enough about the running of Businesses to understand this properly. But I paid the companies’ house some money to find out information about a company.
The main document I got initially was the certificate of incorporation of this particular plc. This company was founded on the 10th of March 08. Just some things about the information I got didn’t seem too normal.
The companies office is based in Scotland but the director when it was started was named to be in Bristol under duport director limited (this is all public information). This person/firm is obviously an agent. The companies office is based >400 miles away from the agents address.
Page 5 of the document says ‘private company limited by shares’ says that the object of the company is to carry out business as a general commercial basis and as an investment company. It then goes on to say that they have the power to do a number of the following things which I won’t list as it will bore the hell out of everyone.
It says the liability of the members is limited. Also says the company’s share capital is £1000 divided into shares of one pound each. Next it says that the agents name and the agent’s secretary has taken shares of one pound each.
Almost one month later 8/4/08 a new director has been appointed and new company secretary. This is under the names who own the company and who would of set this up from the start.
What I am wondering is: Is there anything unusual about what I’ve described? I mean why would you bother to appoint the agent and the agent secretary as director, each with one share each, then point a new director (yourself) and new secretary (sibling)
I apologise in advance if you think these are stupid questions etc, I just want to get an opinion on this way of doing things. I may even find out something that could help me in the future.
Thanks,
M.
Friend just told me its worth doing only if you are making alot of money and want to pay yourself as a dividend and thus not much tax. Only good for high turnover as you have to pay company co-orporation tax.
The main document I got initially was the certificate of incorporation of this particular plc. This company was founded on the 10th of March 08. Just some things about the information I got didn’t seem too normal.
The companies office is based in Scotland but the director when it was started was named to be in Bristol under duport director limited (this is all public information). This person/firm is obviously an agent. The companies office is based >400 miles away from the agents address.
Page 5 of the document says ‘private company limited by shares’ says that the object of the company is to carry out business as a general commercial basis and as an investment company. It then goes on to say that they have the power to do a number of the following things which I won’t list as it will bore the hell out of everyone.
It says the liability of the members is limited. Also says the company’s share capital is £1000 divided into shares of one pound each. Next it says that the agents name and the agent’s secretary has taken shares of one pound each.
Almost one month later 8/4/08 a new director has been appointed and new company secretary. This is under the names who own the company and who would of set this up from the start.
What I am wondering is: Is there anything unusual about what I’ve described? I mean why would you bother to appoint the agent and the agent secretary as director, each with one share each, then point a new director (yourself) and new secretary (sibling)
I apologise in advance if you think these are stupid questions etc, I just want to get an opinion on this way of doing things. I may even find out something that could help me in the future.
Thanks,
M.
Friend just told me its worth doing only if you are making alot of money and want to pay yourself as a dividend and thus not much tax. Only good for high turnover as you have to pay company co-orporation tax.
Edited by amaftau on Wednesday 21st January 19:12
UpTheIron said:
amaftau said:
thanks. Is it only worth having a private limited company if you are making a lot of money?
No.The whole purpose of limited liabilty companies is to limit the financial liability of those involves in the ownership of the business and top create a corporate structure which can split ownership from management.
70% of new businesses fail in the first 18 months. As a sole trader or partnership all losses are the personal liability of the trader or partners. With a limited company the liability of the shareholders is limited to the amount they have paid or agreed to pay for the shares in the company. This may be as little as £1. The directors may aquire personal liability if the manage the business in such a way that it trades fraudulently, wrongfully or whilst insolvent.
IMHO the benefits of limited liability outway the adverse tax liability that may apply.
Before doing anthing take good tax and legal adice.
worty
70% of new businesses fail in the first 18 months. As a sole trader or partnership all losses are the personal liability of the trader or partners. With a limited company the liability of the shareholders is limited to the amount they have paid or agreed to pay for the shares in the company. This may be as little as £1. The directors may aquire personal liability if the manage the business in such a way that it trades fraudulently, wrongfully or whilst insolvent.
IMHO the benefits of limited liability outway the adverse tax liability that may apply.
Before doing anthing take good tax and legal adice.
worty
Lots of people work as Ltd companys in the oil industry. I do and this is my only frame of reference.
The deal is that you can pay yourself a reasonably low salary, say £25k/year for example and then take the rest of the income after corp tax as dividends which you don't pay national insurance on.
You can write off expenses against the corp tax and you can join the flat rate VAT scheme (where you charge VAT on your invoices and repay it as a fixed percentage - usually making a small profit at the same time).
Dividends are taxed at a lower rate (because they are also taxed at source. You can also have more than one shareholder so for example if you wife doesn't work, you can make her a shareholder and pay her dividends up to the 40% cutoff to make use of her lower rate allowance.
I think the point at where it's worth going Ltd instead of PAYE as a one-man consultant used to be around £200/day. Given that pretty much nobody in the oil industry earns less than that, most contractors are Ltd.
If you are looking at a consultancy role, remembver that a Ltd Co. rate will be 12% (?) higher than PAYE because it will include employers NI. Obviously, you won't be paying this all out as NI so there's a bit more profit in that area.
Make sense?
The deal is that you can pay yourself a reasonably low salary, say £25k/year for example and then take the rest of the income after corp tax as dividends which you don't pay national insurance on.
You can write off expenses against the corp tax and you can join the flat rate VAT scheme (where you charge VAT on your invoices and repay it as a fixed percentage - usually making a small profit at the same time).
Dividends are taxed at a lower rate (because they are also taxed at source. You can also have more than one shareholder so for example if you wife doesn't work, you can make her a shareholder and pay her dividends up to the 40% cutoff to make use of her lower rate allowance.
I think the point at where it's worth going Ltd instead of PAYE as a one-man consultant used to be around £200/day. Given that pretty much nobody in the oil industry earns less than that, most contractors are Ltd.
If you are looking at a consultancy role, remembver that a Ltd Co. rate will be 12% (?) higher than PAYE because it will include employers NI. Obviously, you won't be paying this all out as NI so there's a bit more profit in that area.
Make sense?
Lefty Guns said:
Lots of people work as Ltd companys in the oil industry. I do and this is my only frame of reference.
The deal is that you can pay yourself a reasonably low salary, say £25k/year for example and then take the rest of the income after corp tax as dividends which you don't pay national insurance on.
You can write off expenses against the corp tax and you can join the flat rate VAT scheme (where you charge VAT on your invoices and repay it as a fixed percentage - usually making a small profit at the same time).
Dividends are taxed at a lower rate (because they are also taxed at source. You can also have more than one shareholder so for example if you wife doesn't work, you can make her a shareholder and pay her dividends up to the 40% cutoff to make use of her lower rate allowance.
I think the point at where it's worth going Ltd instead of PAYE as a one-man consultant used to be around £200/day. Given that pretty much nobody in the oil industry earns less than that, most contractors are Ltd.
If you are looking at a consultancy role, remembver that a Ltd Co. rate will be 12% (?) higher than PAYE because it will include employers NI. Obviously, you won't be paying this all out as NI so there's a bit more profit in that area.
Make sense?
I am considering coming back to the UK to do some shortish term (9-12 months) work, oil and gas industry related. I did work as a Ltd Co many moons ago and it went OK. Talking to some of my mates who have been working as Ltd Co in UK recently I am getting the impression that net income (basically all I am interested in) could be quite low. One mate telling me that I could expect to pay out upto 50% of what I invoice for The deal is that you can pay yourself a reasonably low salary, say £25k/year for example and then take the rest of the income after corp tax as dividends which you don't pay national insurance on.
You can write off expenses against the corp tax and you can join the flat rate VAT scheme (where you charge VAT on your invoices and repay it as a fixed percentage - usually making a small profit at the same time).
Dividends are taxed at a lower rate (because they are also taxed at source. You can also have more than one shareholder so for example if you wife doesn't work, you can make her a shareholder and pay her dividends up to the 40% cutoff to make use of her lower rate allowance.
I think the point at where it's worth going Ltd instead of PAYE as a one-man consultant used to be around £200/day. Given that pretty much nobody in the oil industry earns less than that, most contractors are Ltd.
If you are looking at a consultancy role, remembver that a Ltd Co. rate will be 12% (?) higher than PAYE because it will include employers NI. Obviously, you won't be paying this all out as NI so there's a bit more profit in that area.
Make sense?
. Is this true? Hardly seems worth all the hassle to me ....The tax benefits of operating through a limited company can still be worthwhile. Asn ever, these benefits can best be obtained if the director/shareholder pays as much as he can to himself through dividends rather than salary - as this eliminates any liability to National Insurance Contributions. However (there always is a "however"), the legislation known as IR35 tries to eliminate this practice in certain circumstances and that is probnably where your mates are getting their 50% tax rate from.
With the right contracts and working practices in place, the risk of being exposed to IR35 can be very much reduced.
With the right contracts and working practices in place, the risk of being exposed to IR35 can be very much reduced.
Eric Mc said:
The tax benefits of operating through a limited company can still be worthwhile. Asn ever, these benefits can best be obtained if the director/shareholder pays as much as he can to himself through dividends rather than salary - as this eliminates any liability to National Insurance Contributions. However (there always is a "however"), the legislation known as IR35 tries to eliminate this practice in certain circumstances and that is probnably where your mates are getting their 50% tax rate from.
With the right contracts and working practices in place, the risk of being exposed to IR35 can be very much reduced.
Thanks, would it be a good idea to let an accountant have a look at the contract prior to signing on the dotted line?With the right contracts and working practices in place, the risk of being exposed to IR35 can be very much reduced.
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