Advice - Company information

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Hi - I passed AAT in 2000 and went onto study and pass CIMA, in doing so my family regarded me as an accountant with a font of knowledge. Through my studies i have been able to give advice on basic taxation issues, but here is the hard bit - My sister has recently started her own business as a nail technician, as we are a close family she has looked at me for all financial advice, i was able to do the basics (stock P&L etc) but i can remember that it is beneficial to register as a company - HELP, i have been onto companies house and other web sites and it seems straight forward to register but what are the benefits of doing so? i would appreciate any advice anyone has, especially the dividends issues etc and wonder if anyone else has found themselves in the same situation.<BR>Thanks<BR>Dave

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  • System
    System Posts: 100,537 🤖 Admin 🤖
    Advice - Company information

    Dave,<BR><BR>Go the the following site, (www.formationsdirect.com) you will get all the information that you require under FAQ,s (About Companies). It will give advice on advantages and disadvantages on company formation. It is easier for you to look there than for me to type it all out. I have used these people in the past, on line and was registered in days. You can buy of the shelf companies for 49 quid and change the name later. Hope this helps.<BR><BR>James
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Advice - Company information

    I think you are on about incorporation (when a sole trader incorporates into a Ltd co). In particular, your issue on dividends. Dividends are basically taxed at 10% (with a credit given for the tax) so these are a more tax efficient ways of extracting profits (providing that there are sufficient reserves on the balance sheet). There are a lot of sole traders/partnerships converting to Limited companies these days because of the tax advantages (corporation tax for a small tax is currently at 19%) whereas if you were a ST/PTNRSP you would be taxed at 10%,22% and 40% respectively.<BR><BR>The only disadvantages to incorporating into a Ltd co are:<BR><BR> Accounts have to be sent to Cos house every year (with a £15 filing fee)<BR> The Public have the right to see the accounts (abbreviated)<BR> Annual returns have to be sent into companies house<BR> Incorporation fees could be about £200 (inclusive of accountants fees for ordering the company)<BR><BR>Overall, however, the tax advantages do outweigh the above (hence why all STs/PTNR are doing it). <BR><BR>With regard to the Divis - the chancellor did bring in a new rule with regard to Corp tax for small companies. Basically if a small company makes a taxable profit of less than £10k they will not pay corp tax (it will be charged at 0%). However, if they declare a dividend out of the £10k profit then the dividend will be taxed at 19% (the corp tax rate).<BR><BR>Any more queries, then please let me know.<BR><BR>Steve

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