Alone, or in company?

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As an accountant advising owner-managed businesses, I am regularly asked: “Should I be running my business through a Limited Company for tax reasons?”

While ‘circumstances alter cases’ and so there is no definitive answer to this question, there are a few simple observations to be made:

    • If there are good reasons why your business could benefit from the commercial protection of being run through a limited liability company, then you can forget about tax. The commercial protection is paramount and will far outweigh any tax or cost disadvantage.
    • If no such reasons exist, it will be more expensive – in terms of your time and responsibilities as a Director, and in professional fees – to operate through a company.
    • Consider whether there are others (employees, spouse, or relations) who you might feel it appropriate to introduce as a partner in your business or LLP.
    • But if your business profits exceed about £50,000 a year – and you do not want to withdraw all those profits for personal expenditure – then there are probably good tax reasons why it would be advantageous to trade through a company.

If, for any of these reasons, you think you are not trading through the appropriate vehicle, then it would be worth discussing this in detail with your accountant, or taking professional advice elsewhere.

“If your business profits exceed about £50,000 a year… then there are probably good tax reasons why it would be advantageous to trade through a company.”

Action: If this question is relevant to you then discuss it with your accountant.

Author: Businesswise Accountant

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