The following Owner-Managed Businesses guidance note Produced by Tolley in association with Julie Butler provides comprehensive and up to date tax information covering:
Many businesses commence in an unincorporated form as a sole trade or a partnership. Start-ups benefit from the simplicity and low administration provided by a sole trader structure in particular. Relief for opening years’ losses are also significantly more favourable for sole traders and new partners. Even once a business has become established, operating in an unincorporated form has benefits and may continue to suit the proprietor(s) indefinitely.
However, there is a distinct path for growing businesses whereby incorporation becomes a natural step.
The key reasons in favour of incorporation tend to be:
limited liability allowing the mitigation of risks associated with expansion
flexibility over income in respect of the timing and form of remuneration
a reduced perception of the administrative burden due to familiarity with running a business
a greater ease of attracting external investment
certain tax reliefs are only available to companies, see the Calculating the tax benefits of incorporation guidance note
Limited liability means that the members of a company (ie the shareholders) cannot normally be held liable for the actions or debts of a company, though this is sometimes eroded by third parties such as banks, etc, who often require personal guarantees from the directors / shareholders in respect of the company’s overdraft or other borrowings. Limited liability can also be lost when the directors continue to trade when the company is insolvent. However, the protection of limited liability nonetheless remains extremely valuable. Limited liability can, alternatively, be acquired by trading through a Limited Liability Partnership (LLP, see the Introduction to LLPs guidance note) but a company offers a number of advantages over an LLP, including some tax advantages.
Many developing businesses find that limited liability becomes a more valuable attribute, especially once the business has taken on its first employees. Furthermore, once a business is running a small payroll, its owner will have become accustomed to dealing with administration, whether performed in-house
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
What is a settlor-interested trust?A settlor-interested trust is one where the person who created the trust, the settlor, has kept for himself some or all of the benefits attaching to the property which he has given away. A straightforward example is where a settlor transfers assets to trustees for
The vast majority of companies will have loan relationships and so will need to consider how they are taxed under the loan relationship rules. There are also specific provisions dealing with relevant non-lending relationships and other deemed loan relationships. Companies are generally taxable on
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s
Personal representatives are responsible for finalising the deceased’s tax affairs. They must file outstanding tax returns and claim any repayments due.For many estates where the deceased’s tax was deducted under PAYE on pensions or employment, a refund is likely to arise because the deceased is