Properly specifying the type of your business is not an optional thing. For many which have their own business, be them self-starters or those who have been in the game for a very long time and wish to expand, they are either Sole Trader Companies or have ownership of a Limited Company. Regardless of the type of business you own, it is important for you to identify it properly so it can pay the taxes appropriate to it’s size and business model. It is imperative to know the differing types of businesses out there – and when you wish to change the type of business you operate, the services of an accountant in North Wales can help you with what you need to do.
Most businesses start as Sole Trader Companies. The enormous draw of doing so is that Sole Traders do not need to register with the HMRC. As a Sole Trader, you and your business are essentially the same thing. Any event to happen to your business, (good and bad) legally is happening to you. As such, you are allowed, as a Sole Trader, to make decisions on behalf of your Company without having to consult a soul. Furthermore, all profits belong to you.
This sounds like heaven, doesn’t it? No doubt some of you are reading this and thinking “well, why can’t I be a Sole Trader?” There are a number of advantages Limited Companies enjoy which are unavailable to Sole Traders. For example, taxation is different, as you will see less overall tax paid for Limited Companies than Sole Traders. As a Limited Company, you are not the owner of your company. Instead you are a shareholder, who also does not have any technical ownership over the profits of the Company. Your pay comes as a wage paid by the Limited Company to you – but with this comes responsibility.
As a Limited Company, you must ensure that the submission of annual financial records to the Companies House is adhered to, as well as setting up PAYE, managing your company’s resources and finances by law, as well as appointing a secretary.
Changing to a Limited Company provides an advantage when it comes to taxation, though your responsibilities increase on a substantial level. If you’re struggling, we absolutely recommend a good accountant behind you – preventing the possibility of things going wrong and grave repercussions occurring as result.