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FINANCE Limiting your
Sole trader This is the simplest form of business to start. There are some forms to complete for HM Revenue & Customs to register as a business and to register to pay Class 2 (self employed) National Insurance before trading has commenced but, in general, that’s about it. If you are going to give your business a trading name then you must ensure that any paperwork you issue, such as invoices, letters etc have the proprietor’s name and address on them.
You don’t necessarily need to open a bank account for your sole trader business, although it is recommended to do so because of the HMRC requirements to keep separate records for businesses. As a sole trader you must also complete a self assessment return annually.
Limited company Generally small limited companies are formed where the expected level of profit is substantially greater than that required by an individual for living expenses. For example if a sole trader made a profit of say £50,000 they would pay tax on the whole amount. However if the individual actually only required £25,000 as a “salary” for living expenses then, as a director of a limited company, even with paying the associated National Insurance contributions, his tax liability would be substantially lower. Limited companies can also be a useful tool in presenting a “corporate image” as opposed to the “one man band” image associated with small traders.
To set up a limited company you must check the name you want is available and open a separate bank account for it before you can begin trading. Also remember that as a director of a limited company you are effectively an employee – albeit potentially the most senior employee.
The owners of the company are the shareholders – directors are appointed by the shareholders to run the company on a
options?
If you’re thinking of starting a business but are confused by terms like sole trader and limited company read Jamie Crampton’s guide.
day to day basis, although in the majority of cases directors and shareholders are usually the same person/people. Dividends may also be paid by the company to shareholders (not directors) – but these can only be paid out of company profits AFTER corporation tax. Limited companies must also file corporation tax returns and submit accounts to Companies House.
As usual what will work for one individual may not be the best solution for another, and you should think carefully and/or seek advice before deciding which way to go with your particular venture. Good luck!
TH THE AUTHOR
Jamie Crampton qualified as a Chartered Management Accountant in 1995 and in 2008 set up Accounting 4 Fitness, dealing with clients in the fitness industry. In addition to
this he advises personal training students on setting up in business and works with accounting students at the University of Bedfordshire in Luton.
Does your financial fitness match your personal fitness?
Whether you are an established or newly formed business, or thinking about starting, we can help you. We provide advice on Accounting, Self Assessment, Income & Corporation Tax, VAT, PAYE and many other financial services at extremely competitive rates, which can be paid monthly. We are experts in all aspects of Leisure & Fitness industry accounting and can easily arrange personal consultancy sessions that fit in with your schedule, anytime and anywhere in the UK.
For more information call Jamie Crampton, ACMA (T) 01234 267860 (M) 07830 225612 (E) Jamie@a4f.co.uk.
Accounting 4 Fitness
12 Boxgrove Priory, Bedford MK41 0TQ. Registered with the Chartered Institute of Management Accountants as a Member in Practice.
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