[Steve Barnett (Carpet Care Plus)]

Hi guys need your opinions.

I am already a ltd company on the supply and fit side, but now the cleaning side is up and running I am torn between running that as a seperate ltd company or operating as a sole trader.

I was going to put everything under the banner of Carpets Plus, but from a marketing point of view there is no mention of cleaning in the company name.

All opinions appreciated.

Steve

[John Kelly]

If you are doing mainly domestics with the carpet cleaning then it may be worth keeping it as a sole trader. This way you could leave this non vatable, as long as you don't reach the threshold. If you lump them both together and the total turnover is over the vat threshold you would have to charge vat on your carpet cleaning.
It is perfectly legal to have a sole tradership which is not vat registered and a limited company which is as this is a seperate entity and you are merely an employee as a director. Having 2 sole traderships is however different and you would have to combine the turnover for vat reasons.

[Steve Barnett (Carpet Care Plus)]

Thanks John

[spencer davies]

We have traded as a Limited company for many years now, it was probably one of the best decisions
I have made.


Regards



S

[Doctor Carpet (Ret'd)]

Hi Steve

Only just caught up with your question.

Your accountant will advise you as to whether the two parts of your business empire can be treated as separate businesses or not. If they can be then as John says one can be VAT registered whilst the other is not. It doesn't make any difference if both, none or either are limited or not.

Also as John says if mainly domestic work then it would probably make sense to remain non-VAT registered until such time as the level of turnover or change of client base makes is appropriate or not.

The decision of whether the second business or not should be limited is a different question. When net profits reach about the £20000 mark (again your accountant can confirm this) because of the present taxation regime it becomes more cost effective to go limited. (In basic terms this is because you then pay yourself a dividend from net profit as opposed to a salary. Although this comes to the same thing what it does mean (as I am sure you already know) is that you don't pay National Insurance on dividend payments whereas you would on a salary.)

The downside of a limited company is that your accountancy bill will be more, you have more returns to do to Companies House and you will get more cold calls from people because your company details including accounts are public knowledge. Hence the reason why net profit has to be of a certain level before this option starts to save you money.

Being limited will also give you protection in the case where if it all went pear -shaped you as a director have certain protection that a sole trader/partner would not. Again the downside is that borrowing can become more expensive although there are ways round this. (I've asked Pete if he would like me to do a talk around this subject and other financial matters at the next CCDO.)

Limited can also make you sound like a bigger (and by implication in some people's eyes) a better and more professional business.

And finally you can always do as I do. I am limited legally but can also give the impression of being a sole trader. the way you do this is as I do:

Doctor Carpet Limited Trading as Doctor Carpet which gives me the best of both worlds which you wouldn't get if I was say:

XYZ Limited Trading as Doctor Carpet

Hope all that helps.

Roger

[mark_roberts]

£20k seems a bit low are you sure that figures right?

Mark

[Doctor Carpet (Ret'd)]

Might be a bit low and the figure may have changed since I looked at it but hence my comment to discuss with your accountant because in any case it is a judgement call and you may put greater weight on some of the other reasons for going limited rather than simply doing the cost benefit/maths.

[John Kelly]

The tax rate has just changed for dividends so there isn't much of an advantage anymore.

[Glynn]

Dont forget John that there is no NI on dividends.

[Steve Barnett (Carpet Care Plus)]

Thanks for the replies guys, the main reason for considering going ltd for the cleaning side is that the company name I am considering is the same as the domain name I have purchased for my new website. Therefore I want the protection against someone else setting up as a ltd company using that name if I went down the sole trader avenue.

Steve

[Doctor Carpet (Ret'd)]

So just buy the company name and register it even if you don't then use it. I think it is a fairly minimal cost for doing this.

Don't forget you can also register your sole trading name to protect that against other people using it.

I've got legal ownership of :
the trading name
the limited company name
the domain name.co.uk

It all helps build value to your business as well.

Roger

[Ian Rochester]

Reasons for going Ltd

1. Reduced liability to yourself and your personal ownings if anything goes wrong.

2. Tax benefits, it now only really applies if your earnings/profits are into the higher tax bracket (£36,000+) because the Corporation Tax and Lower rate of Personal Income Tax are now the same (20%)

3. Image, a Ltd business is often "perceived" by your potential customers (especially commercial) as being bigger and better than a sole trader.

4. On the downside, your accountancy fees will increase as you need to provide a full set of accounts at year end, rather than just a tax return.

[Ian Gourlay]

Is there any way round the VAT problem without going Limited.

[Doctor Carpet (Ret'd)]

Ian

They are two separate issues.

You can be limited and VAT registered or unregistered.

You can be a sole trader/partnership and be VAT registered or unregistered.

The choice is entirely yours unless t/o is greater than £67k in which case you must be registered.

[SimonW]

Thumbs up for previous posts chaps. Might you folks shed some more light on my accountants offer please? Basically I am about to start marketing campaign within next 2 months (Cc and Upholstery cleaning), my potential annual turnover is set for 25k (I fully understand much chance I won't reach even that in my first years) I will keep for now my full time job gradually reducing working hours. My accountant, a lovely lady has offered to me going Ltd instead sole trader which is totally opposite to what most of you here suggest.

I am trying to figure our the benefits of becoming Ltd from the beginning... I hope she's not tend to create more work for herself

Will know much more next week after seeing her.

Any advice, much appreciated!

[Doctor Carpet (Ret'd)]

Hi Simon

Nothing really has changed in the last 8 years!

The arguments for and against are still as described above.

The only extra things to say are that there can be a bit of a "kerfuffle" in changing over from sole trader to limited company but that in itself really isn't a reason to go as a sole trader to start with.

More interestingly, the way dividends are to be treated is changing and so if you are generating a high net profit the advantage of being Ltd and paying dividends is loosing some of its advantages.

From what you have told us about yourself and your plans it seems crazy to go limited at this stage as you will have lots of upfront and ongoing unneccessary costs which given your projected t/o will take a disproportionate amount of your profit.

Oh, and your accountant's bill will also be much higher.

If you went ltd you would also by definition need a separate bank account (not that I would advocate running your business through your personal account-although it is possible to do) and if you sail close to the wind in terms of keeping a credit balance, banks are much less generous at giving overdrafts to ltd companies. Instead you would have to borrow in your personal name to keeps costs of borrowing down but that would skew your balance sheet.

Hope I've not blinded you with science.

Rog

[alan lewis]

The VAT threshold is £82000 this year

Alan

[Brendan (chem2clean)]

Our vat threshold in Ireland is 37.500 euro ,about 29000 pound.Just paid my Nov/Dec vat bill ,TEARS IN MY EYES.

[Steve Chapman]

Being limited company will be less tax effective this year as some of the dividends you receive will be taxed where previously they were not.......

[John Kelly]

In my opinion you'd be crazy to go limited at this early stage. Go sole trader, much easier admin and cheaper accountancy fees. Ask your accountant the reasons why she suggests it, I'd be interested in her reply.