Registered a Ltd company for sole trader?

[Ray Stafford]

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.

No, with respect, it isn't quite the same, and con-men aren't the issue. (Their MO is usually different - cloning was all the rage last year). The fact is that choosing a limited company as your mechanism sends a signal to lenders that you might be concerned about risk.

Any business which gives credit is effectively a lender, just the same as a bank. We make credit decisions based on imperfect information. It doesn't matter what YOUR reasons for starting a limited company are, you are putting yourself in a higher risk group.

Its like buying a Porsche 911. YOU may know that you will only drive it sensibly, but your insurer will put you in a higher risk category regardless.

 

[Killy Bing]

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.

Ahh see you weren't a new company applying for credit then!
This reminds me.

 

[lame plumber]

As Ray points out so well, some people running ltd companies for the wrong reasons, which has lead me to refuse work from certain builders wanting me to sub for them, and I have been proved right in my thoughts in the past to follow this line.

 

[Ray Stafford]

There is another side to this, which is the nature of your purchases.

Merchants make different margins on different types of product. For us, the level of margin is roughly the same as the banks interest rate.

Since heating products, and particularly boilers, have very low margins, our appetite for unsecured lending to a limited company doing lots of boilers is pretty low. Spend more on higher margin product lines, and our appetite for risk may be higher, as our rewards are higher.

Don't forget that all the bad debts that a merchant takes are paid for by the good customer who do pay.

 

[Sag]

Yea Ray, two different views to risk. Your risk averse to new ltd's and i'm risk averse to my personal lifestyle being ruined by a business. Neither is wrong in their approach and we may never do business due to this, but I stand by limiting your exposure is good business sense. You do it by selective credit accounts and I do it by being an ltd.

What if some major jobs I'm doing Don't get paid because the customer goes bust. As an ltd I can save my family being effected by this. As a sole trader I'd be in the crap!

 

[lame plumber]

good business is picking your work to lower the risk, and your better refusing some jobs than running the risk of not being paid. Being limited and taking higher risks isnt good business sense at the end of a day, thats the reason this country is in the doldrums now, down to poor financial controls and too much risk, which from your previous life you would realise.

 

[Sag]

My previous life? My previous job?

You speak as if you know something/anything about me, you don't.

I didn't say go ltd to take bigger risks. I said ltd protects you.

I tell you what, don't have any PL insurance and just 'be careful' and select your jobs wisely and see how far you get.

 

[Killy Bing]

Ahhhh two schools of thought.
neather are right and neather are wrong
but rays only going to easily give credit to one of them......

 

[lame plumber]

a long way to date as I always found the advice received from financial advisers and finance companies to be detrimental to my pocket, so I choose not to use them and prefer not to waste my earnings on PL insurance and the like.

I plan to make profit not to fend off loss

 

[Sag]

So you think that's a clever move?

What happens if you get a lucrative job for a very expensive house?

Do you turn it down due to the risk of causing more damage than you can afford to repair or do you take it on because 'your careful enough' that you don't need PL?

Do you have home insurance? Or is that a waste of money too because you're too careful to have a flood or storm ruin your property?

 

[Jimbob]

Interesting subject.

Never considered going Ltd myself as I'm not that ambitious myself, and don't take on anything risky, ie, possibility of not being paid.

Iv been trading for 6 years and just getting to the point of becoming VAT registered, which iv avoided for as long as possible. I can't see how a start up would need to jump straight into LTD or even VAT. Best to build up at a sensible pace

 

[Jimbob]

a long way to date as I always found the advice received from financial advisers and finance companies to be detrimental to my pocket, so I choose not to use them and prefer not to waste my earnings on PL insurance and the like.

I plan to make profit not to fend off loss

Really LP? I though GSR required PL

 

[lame plumber]

my mistake, was thinking pl stood for some insurance product to stop you losing income or whatever, but if your referring to public liability we seemed to have moved 15 paces left. Of course I have pl insurance as you mention but this is nothing to do with ltd companies and the earlier arguments put forward. Not sure. what line you argument is trying to achieve now

 

[Sag]

Ahhhh two schools of thought.
neather are right and neather are wrong
but rays only going to easily give credit to one of them......

Absolutely, and he's entirely entitled to do that. He may miss out on a lot of business, he may save himself a lot of cash & stress. But each to their own when deciding who to give credit to. Too many people think it's their right to have credit and moan that the banks aren't lending etc.

I don't need credit, it just eases cash flow. Too many companies rely on trade accounts and overdrafts or worse factoring to survive, all are a bad idea. They should look to draw less out of the company and pay off these debts until they can operate in a cash positive way.

The main reason for our trade account is ease of accounting. Instead of 100+ receipts a month to go through, I have one statement. I can also add additional contracts to spend on our account making supplying materials easier for our subbies and helps their cash flow. Those subbies that aren't VAT registered use our account and we benefit from being able to reclaim VAT that we otherwise wouldn't if they worked on a supply & fit basis.

And with average job being about £3.5k there is a lot of transactions and VAT to deal with.

 

[Ray Stafford]

, thats the reason this country is in the doldrums now, down to poor financial controls and too much risk

At the risk of sounding picky, the cause of the recent financial crisis was not "too much risk". It was more that risk was mislabelled by the rating agencies, misunderstood by people who ought to have known better, and levels of risk were accepted by organisations whose business model wouldn't stand it.

There is nothing wrong with high levels of risk, so long as they are priced correctly and undertaken by organisations who understand them correctly.

For a very readable analysis of the banking crisis, try The Big Short by Michael Lewis.

 

[Killy Bing]

........
simple sag, staged payments and/or materials costs up front.

In reality, unless you start doing commercial installs or estates of new builds
the only way you will have your personal assets threatened is if you blow a house up or kill a customer.
due to being gas safe, being limited wont save you from either as you're a competent person.

food for thought.

 

[Sag]

my mistake, was thinking pl stood for some insurance product to stop you losing income or whatever, but if your referring to public liability we seemed to have moved 15 paces left. Of course I have pl insurance as you mention but this is nothing to do with ltd companies and the earlier arguments put forward. Not sure. what line you argument is trying to achieve now

No, it's to do with risk and liability. But obviously wires have been crossed. But if GSR didn't require PL, would you have it?

If so why? If not, why not?

 

[Sag]

Off topic but regarding VAT. If you do bathrooms for the disabled or elderly, you can charge the job as ZERO RATED or reduced VAT at 5%. But you're able to claim back (or at least offset) the entire 20% for any labour and materials you paid out. Just another example of why being VAT registered can be a good thing, regardless of if you hit the threshold or not.

 

[lame plumber]

taking out public liability insurance has nothing to do with being with gsr as far as Im concerned, it is just to protect those I work for from me accidently wrecking their lives and getting some compensation. Nothing to do with ltd companies as this thread started on.

 

[Sag]

taking out public liability insurance has nothing to do with being with gsr as far as Im concerned, it is just to protect those I work for from me accidently wrecking their lives and getting some compensation. Nothing to do with ltd companies as this thread started on.

It protects YOU from being personally sued for the damage. That's why you take out the policy not the householder.

So, if it wasn't required, would you have it or not?

 

[lame plumber]

Off topic but regarding VAT. If you do bathrooms for the disabled or elderly, you can charge the job as ZERO RATED or reduced VAT at 5%. But you're able to claim back (or at least offset) the entire 20% for any labour and materials you paid out. Just another example of why being VAT registered can be a good thing, regardless of if you hit the threshold or not.

not quite true, you dont need to be vat registered for the customer to claim 0 vat, they can do it for themselves by buying direct fm the merchant, then you just charge for the fit and add some on for the loss of supplying the suite, being your not vat registered they dont cop any tax and alls well.

 

[Sag]

not quite true, you dont need to be vat registered for the customer to claim 0 vat, they can do it for themselves by buying direct fm the merchant, then you just charge for the fit and add some on for the loss of supplying the suite, being your not vat registered they dont cop any tax and alls well.

And you lose the opportunity to make a margin by supplying the goods at the same price they could have got them for, but by buying them at trade price......

 

[lame plumber]

It protects YOU from being personally sued for the damage. That's why you take out the policy not the householder.

So, if it wasn't required, would you have it or not?

now who is being muppet like, Ive already answered that one

 

[lame plumber]

And you lose the opportunity to make a margin by supplying the goods at the same price they could have got them for, but by buying them at trade price......

read the post muppet man

 

[Sag]

now who is being muppet like, Ive already answered that one

You said of course you have it, but not answered if you would have it if you didn't need it.

And as I've said, it protects you, so despite all your seeming negative vewis on being risk averse (such as having an ltd to protect personal assets) you do in fact have (and presumably would have regardless of being grs) insurance - protecting you! I.e. covering yourself from a worst case scenario, not because your out to cause damage.

If you stopped trying to argue for the sake of it, you might see what im saying.