How the structure affects you.
WHAT A BUSINESS NAME MEANS PERSONALLY
You and the business are the same person legally.
WHAT THAT AFFECTS
- Liability: unlimited
- Tax: profits taxed as your income
- Borrowing: assessed against you personally
WHAT A COMPANY MEANS PERSONALLY
A separate legal person.
WHAT THAT AFFECTS
- Liability: limited, subject to guarantees and director duties
- Tax: the company is taxed, and you are taxed on what you take
- Money: it is the company's, not yours
WHY THAT LAST POINT MATTERS MOST
Taking company money without proper treatment creates tax and legal problems.
WHAT PROPER TREATMENT MEANS
Salary, taxed Dividends, declared from profits Repayment of a documented loan Reimbursement of documented expenses
WHAT TO ESTABLISH
Which mix is appropriate.
WHY IT MATTERS FINANCIALLY
The combination affects total tax substantially.
WHAT TO TAKE ADVICE ON
That decision, from an accountant.
WHAT ELSE THE STRUCTURE AFFECTS
Whether you can bring in partners Whether the business can be sold Credibility with larger customers Ongoing filing obligations and cost
WHAT TO REVIEW
Whether the structure still fits, as the business grows.
WHEN TO RECONSIDER
When liability grows When you take on staff or partners When customers require a company
WHAT CHANGING COSTS
Some administration, and professional fees.
WHAT TO AVOID
Choosing on registration cost alone.
