When starting your business, one of the biggest decisions that you must face is whether to operate as a sole trader/partnership or as a limited company. Company tax rates have fallen in recent years and this has made the company route much more attractive to small companies even ones with low profits. However, deciding to run your business as a limited company should not be taken on tax decisions alone. The nature of the business, its trading methods and even personal circumstances of the owners need to be taken into consideration before a conclusion is reached and therefore it is important that you seek advice from your accountant before making any final decisions.
Here are a few things you must know;
Who owns the company? A limited company is a seperate legal entity which is run by directors and is owned by its shareholders. Whereas a sole trader owns the business outright and has much more freedom to make changes within the company. However, if debt builds up in a limited company, it belongs to the company. If debt builds up for a sole trader, the debt belongs to the sole trader.
What happens on the sale or transfer of a business? Limited companies are often viewed to be more professional and as such can command a higher asking price. In addition, the ability to buy or transfer shares can make the transfer of ownership a fairly straight forward task.
If you are starting a business and need advice about how to run your business, guildford accountants can help you.