Choosing the best structure for your business – be it sole trader, partnership or limited company – will have immediate consequences. There may be tax savings involved in running a company, and this is certainly an important factor. But the calculations are complex. They depend on the level of profit made; the proportion of profit retained in the business; and the type of business. Attention to the remuneration package, business structure and personal circumstances of the director-shareholders is also needed.
Going forwards, incorporation can give you access to tax-advantaged investment opportunities, such as the Enterprise Investment Scheme. You may also be able to obtain tax incentives on research and development.
But incorporation is not just about tax. It also brings many regulatory requirements that you will need to ensure your business complies with. You will have to make returns to Companies House, and set up a PAYE scheme to pay director-shareholders. Such ‘red tape’ may involve you in compliance costs, and making a balanced decision means taking all these factors into account.
Read our guide on Becoming a limited company to find out more.
For help or advice on the best way to structure your company, please don’t hesitate to contact a member of our friendly team.