Registered a Ltd company for sole trader?

[Sag]

Lol, what a muppet.

 

[stratplus]

What effect does being a sole trader have on your home being at risk?

 

[Sag]

As a sole trader you are personally liable for ALL the financial implications of your company as your company is essentially you trading as xxxx plumbing & heating etc.

Taxes, fines, supplier accounts, salary to any staff etc. The only 'protection' would be your PL insurance which is not going to protect you from everything anyway (ltd or not).

So short answer, your home, car, savings and all assets are at risk when a sole trader.

 

[lame plumber]

as they are if your a director of a ltd company and haven't conducted your trading responsibly and with due care.

 

[Sag]

You don't have to run a business without due care and responsibly for it to fail. Just look at what the recession did to businesses across the UK.

 

[lame plumber]

You don't have to run a business without due care and responsibly for it to fail. Just look at what the recession did to businesses across the UK.

not an excuse in the eyes of the law though is it.

 

[Nostrum]

Lame, I do get the feeling you see things as having the 'if I'm not doing it, it's not right' type attitude in this thread.

Thousands of companies are incorporated every year and as many also go to the wall. Unless you've been completely irresponsible then you have no reason to worry although as already said, most lenders of credit will require a personal guarantee these days. Also, banks will lend money but expect the director to take liability of the repayments.

There are tax gains, and increased accountancy charges.

My business is not limited, but I hold the ltd name declared as dormant to protect it from being used by someone else. It may be that I go ltd this year as I am taking on some more ambitious projects, and would not want to risk my house etc but that doesn't make me irresponsible. Many business decisions carry risk otherwise everyone would be doing it already with nothing to loose. Banks etc recognise this, but obviously don't want all the risk dropped on their lap, hence the personal guarantees.

Someone mentioned choosing the name carefully, in reality it's not a major issue. You can be XYZ ltd trade as ABC plumbing if you like.

There has to be a logical reason for going limited though, simply wanting the 3 letters after your name is silly. You'll get no kudos for it, some tax benefit if you are earning enough, and some hassle from lenders and increased overheads. At the early stages I would concentrate more on your route to market, secure the trading name if you feel necessary and make the business profitable.

 

[lame plumber]

Not it the least mate, but I have seen a fair few people convert to ltd for all the wrong reasons and they sought advice some of the time.

the main reason is to attempt to protect your private assets and distance yourself from your trading company as well as getting a different set of tax liabilities to work with. As Ive tried to make clear, if your trading with a profit of around £40k, you could save some £2900 or so in tax if your ltd. But then you need to take into account the additional costs that youll incur running the ltd co and at this level theres probably no point in going ltd for tax purpouses. Also the ltd side has been watered down, and if your creditors believe youve been complicit in the failure of your co then you can be hounded by them still for monies owed. so defeats the point of being ltd somewhat. Finally none of my comments were aimed at you personally, I was responding more to another op, so back in the arms and buy me a pint

 

[Chalked]

Good profit and high turnover with risky clients..... Go ltd

average profit, average turnover and good credit control. Don't bother.

 

[Sag]

Also, there are tax benefit of getting 'key man' insurance which can act as a kind of life insurance policy. A good IFA can guide you on that too.

 

[lame plumber]

Also, there are tax benefit of getting 'key man' insurance which can act as a kind of life insurance policy. A good IFA can guide you on that too.

can tell your background,

 

[Sag]

Really, what's my background then?

 

[Nostrum]

You've only got to look at the way some companies are wound up or liquidated in very questionable ways to assume that proving foul play is harder than it would seem.

As a director you must act in a way that is of most benefit to the company. I would imagine that paying yourself an unsustainable wage intentionally, or selling assets to yourself at ridiculously low prices would account to some form of misconduct and could land you in the poo.

Generally though most directors run the business with all good intent and purpose. Whether they make the right business decisions is another matter but I think you would be hard pushed to be liable for a mistake or bad judgement action to put you in a position of personal liability. I'm sure this is why administrators are brought in for PLC's, to check the companies accounts up to that point and ensure the damage is somewhat reduced. After all, shareholders will want to be sure they haven't been shafted by the directors?

Your right though setting up a Ltd company should not be done without careful consideration and weighing put he pros and cons, of which there are both.

That said, in your example you've proven the financial gain to be had in being limited, even if the accountancy bill added £1500 you'd still be £1400 p/a better off, that's a whole 8hrs work for us gas engineers.

 

[lame plumber]

you got a cheap accountant there

 

[Nostrum]

Or maybe yours is expensive? :sultan:

For some reason I can only choose smileys from racial minorities on my ipad.. This is the only one that seems to work.

 

[Ray Stafford]

Lots of different points being mixed together here.

There are three main reasons that our customer choose to go Ltd:

1. To protect their personal assets from business risks
2. To minimise their tax liability
3. If the business is owned by more than one person, a ltd co shareholding structure gives more flexibility

The benefits of 1) are not as clear-cut as some people think, but they are real. Many wholesalers (including us) will ask for a directors guarantee unless the ltd company has significant assets and several years trading history. The bank and other lenders are likely to take a similar line. My personal view is that the best way to protect those assets is to trade in such a way that you don't enter into commitments that you can't fulfil. I appreciate that this can be difficult when subbying on new-build for example, which is why we don't chase customers who specialise in that line of work, because they are inherently risky.

To be honest, you are unlikely to be pursued by the authorities if your Ltd company goes bust unless
a) you owe the taxman lots of money or
b) you do it over and over again

The tax liability issue depends on individual circumstances. The best advice our accountant ever gave us was "run your business to make a profit, not to avoid tax". Unless the sums are quite large, you need to be aware that you might find yourself running up accountancy bills, and using up your own time on stuff that could have been earning money.

The business of mixed ownership probably doesn't apply in this case. I tend to be wary of new starts that are run by more than one person anyway - new partnerships often dont survive the growing pains, and sleeping partners tend to wake up quickly if they dont get the return they were expecting.

 

[Ermintrude]

Another intelligent post from ray. Bet he's just a vegetable at work !

 

[lame plumber]

Ray gives it from the other side of the fence

 

[Centralheatking]

Very sound advice from Ray maybe he did not spell it out but suppliers will not always allow credit accounts to small and new ltd companies cause when they go tots up ray and co cannot get the dosh back but with sole traders etc they can take your truck wife etc CHK

Lots of different points being mixed together here.

There are three main reasons that our customer choose to go Ltd:

1. To protect their personal assets from business risks
2. To minimise their tax liability
3. If the business is owned by more than one person, a ltd co shareholding structure gives more flexibility

The benefits of 1) are not as clear-cut as some people think, but they are real. Many wholesalers (including us) will ask for a directors guarantee unless the ltd company has significant assets and several years trading history. The bank and other lenders are likely to take a similar line. My personal view is that the best way to protect those assets is to trade in such a way that you don't enter into commitments that you can't fulfil. I appreciate that this can be difficult when subbying on new-build for example, which is why we don't chase customers who specialise in that line of work, because they are inherently risky.

To be honest, you are unlikely to be pursued by the authorities if your Ltd company goes bust unless
a) you owe the taxman lots of money or
b) you do it over and over again

The tax liability issue depends on individual circumstances. The best advice our accountant ever gave us was "run your business to make a profit, not to avoid tax". Unless the sums are quite large, you need to be aware that you might find yourself running up accountancy bills, and using up your own time on stuff that could have been earning money.

The business of mixed ownership probably doesn't apply in this case. I tend to be wary of new starts that are run by more than one person anyway - new partnerships often dont survive the growing pains, and sleeping partners tend to wake up quickly if they dont get the return they were expecting.

 

[Ray Stafford]

Very sound advice from Ray maybe he did not spell it out but suppliers will not always allow credit accounts to small and new ltd companies cause when they go tots up ray and co cannot get the dosh back but with sole traders etc they can take your truck wife etc CHK

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

 

[Killy Bing]

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

fully agree.

But out of interest, as we move from sole trader to ltd do we have to notify you?
also would our credit get reduced ?

 

[Sag]

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

It's good business sense to protect yourself. It doesn't mean you are a conman for running an ltd (although there are far too many of them out there).

That's like saying having PL insurance means you know you're gonna screw up. That's not the case, you just value the security afforded to you by paying the premium.

 

[Killy Bing]

It's good business sense to protect yourself. It doesn't mean you are a conman for running an ltd (although there are far too many of them out there).

That's like saying having PL insurance means you know you're gonna screw up. That's not the case, you just value the security afforded to you by paying the premium.

The flipside is why does a new business have to be limited when they don't have the work to threaten their personal assets?

 

[Ray Stafford]

fully agree.

But out of interest, as we move from sole trader to ltd do we have to notify you?
also would our credit get reduced ?

You have to do more than notify us. The term "going limited" is misleading. You aren't changing at all.

When you start a limited company, it is a new legal entity. If it wants credit, it must apply for it in its own name.

If you are prepared to sign a directors guarantee, (which is incorporated into our account application form) then the limited company account is likely to "inherit" your credit status.

If you aren't prepared to sign such a guarantee, then your personal credit record is of no help, and we probably won't extend any credit at all to a new company until it has a few years trading history, and preferably some value in the balance sheet.

 

[Masood]

The flipside is why does a new business have to be limited when they don't have the work to threaten their personal assets?

I went Ltd from day 1. Nothing to do with protecting assets, just the way I wanted to structure the company. I had (still have) a vision and strategy, and a Ltd. company fit that better than sole trader.

I've had no trouble opening trade accounts but that may be because I didn't open accounts until I'd been trading for a while, always paid my bills, and showed through my purchasing history that I have a viable business.