ChatterBank0 min ago
Partnership over Limited?
5 Answers
I'm currently working as a partnership in which we just take an equal salary each week.
I have recently been informed that becoming a Limited Company would be very beneficient for Tax/NICand liability.
The problem is, is that my accountant is also my Brother in Law and he has always advised against doing so. I'm told this is perhaps because he doesn't have the relevant qualifications/knowledge(chartered accountany).My business partner is now pushing for this change but I'm worried the rift it my cause in the family.
Can anyone please advise on any pros or cons on implications.
I have recently been informed that becoming a Limited Company would be very beneficient for Tax/NICand liability.
The problem is, is that my accountant is also my Brother in Law and he has always advised against doing so. I'm told this is perhaps because he doesn't have the relevant qualifications/knowledge(chartered accountany).My business partner is now pushing for this change but I'm worried the rift it my cause in the family.
Can anyone please advise on any pros or cons on implications.
Answers
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Refer to this recent question and Skyline's answer in particular.
http://www.theanswerbank.co.uk/Business-and-Fi nance/Business/Question642976.html
Being limited provides some protection to your personal assets from creditors in the event of the worst happening. It may also have NI advantages. It has no impact on tax because the rate at which Corporation tax is deducted on a small business (20%) is exactly the same as the personal rate of income tax (basic rate).
However you can minimise some of the NI contributions by taking dividends from the business and not a salary.
Running a Ltd Co comes with obligations - including drawing up accounts and submitting these to Companies House. Of course you can pay an accountant to do this for for but there is no obligation that the accounts be drawn up by a qualified accountant. Your brother-in-law should be perfectly able to generate the accounts if he has accountancy background. I do the same for my business - I am not a chartered anything.
http://www.theanswerbank.co.uk/Business-and-Fi nance/Business/Question642976.html
Being limited provides some protection to your personal assets from creditors in the event of the worst happening. It may also have NI advantages. It has no impact on tax because the rate at which Corporation tax is deducted on a small business (20%) is exactly the same as the personal rate of income tax (basic rate).
However you can minimise some of the NI contributions by taking dividends from the business and not a salary.
Running a Ltd Co comes with obligations - including drawing up accounts and submitting these to Companies House. Of course you can pay an accountant to do this for for but there is no obligation that the accounts be drawn up by a qualified accountant. Your brother-in-law should be perfectly able to generate the accounts if he has accountancy background. I do the same for my business - I am not a chartered anything.
I would have said this thread was of more direct relevance than the one buildersmate has linked:
http://www.theanswerbank.co.uk/Business-and-Fi nance/Question644122.html
http://www.theanswerbank.co.uk/Business-and-Fi nance/Question644122.html
And to answer more specifically.
Really each case should be on its merits and its difficult to advise with just the barest of facts. It's also difficult when your adviser is "family" and has a vested interest in maybe not providing optimal advice.
The benefit of a company if you go down the dividend route is that you avoid paying National Insurance. If you intend to pay a salary out of the company then it doesn't really make much odds. There are some companies that aren't allowed to go that way though, it depends what you do.
Presuming the company is small and not auditable (turnover of less than �6.5m, assets less than �3.27m) then in theory anyone could prepare the accounts. They don't need a qualification at all if they know what they are doing. In practice it's likely that you would need to be a qualified accountant with the appropriate software and handling a lot of companies to want to be dealing with one.
I presume you are implying that your brother in law either isn't an accountant at all but prepares basic financial accounts for you, or is an accountant but a small fry one who really only deals with personal tax issues? If that's the case then it may well be he couldn't cope with preparation of even straightforward company accounts which have to appear in standard statutory form. Unless he's charging a daft amount of money to deal with your stuff though I can't see why he'd have that much vested interest in preventing you going that way if he thinks its right for you. To be honest, if it's just that he can't cope with corporate presentation then he could continue to do what he does now and then simply pass it to a more qualified accountant to stick in corporate form for a smaller fee than they'd charge to do the whole thing.
Really each case should be on its merits and its difficult to advise with just the barest of facts. It's also difficult when your adviser is "family" and has a vested interest in maybe not providing optimal advice.
The benefit of a company if you go down the dividend route is that you avoid paying National Insurance. If you intend to pay a salary out of the company then it doesn't really make much odds. There are some companies that aren't allowed to go that way though, it depends what you do.
Presuming the company is small and not auditable (turnover of less than �6.5m, assets less than �3.27m) then in theory anyone could prepare the accounts. They don't need a qualification at all if they know what they are doing. In practice it's likely that you would need to be a qualified accountant with the appropriate software and handling a lot of companies to want to be dealing with one.
I presume you are implying that your brother in law either isn't an accountant at all but prepares basic financial accounts for you, or is an accountant but a small fry one who really only deals with personal tax issues? If that's the case then it may well be he couldn't cope with preparation of even straightforward company accounts which have to appear in standard statutory form. Unless he's charging a daft amount of money to deal with your stuff though I can't see why he'd have that much vested interest in preventing you going that way if he thinks its right for you. To be honest, if it's just that he can't cope with corporate presentation then he could continue to do what he does now and then simply pass it to a more qualified accountant to stick in corporate form for a smaller fee than they'd charge to do the whole thing.
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