There are potential tax savings to be made by converting your business to a Limited Company due to the different tax treatment of small companies compared to self-employment.
Another major benefit is that small companies are not required to make “payments on account” – which is a significant financial burden to the typical small self-employed business.
As well as tax savings, there may be other advantages such as increased credibility with both customers and suppliers.
The ability to draw profits from a company by a combination of Dividends (which do not currently attract National Insurance) and salary can mean tax savings of hundreds to thousands of pounds a year. The amount that can be saved depends on the profits you make, and the split between dividend and salary drawn from the Company.
Trading as a Limited Company may not be suitable for everyone. There are many factors and taxation issues that need to be considered on an individual basis before deciding if it would be advantageous to trade through a limited company.
The Limited Liability Partnership
This is a hybrid of a partnership and a limited company, as it allows for the partners to maintain limited liability status towards the creditors (on the basis that the business has not traded fraudulently or recklessly), whilst the profits of the business are taxed on the partners personally.
The LLP is not considered suitable for most trades as the compliance procedures and transparency of a limited company are required. The partners do not receive the tax advantages of payments by dividend, but there are certainly situations where this style of trade is considered suitable and we would be pleased to advise on these circumstances.
When the decision is made to start or purchase a Limited Company, RiverView can offer you a complete range of professional services and ongoing support to ensure your Company runs smoothly and efficiently.