The following Owner-Managed Businesses guidance note 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 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
**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
To view our latest tax guidance content, sign in to Tolley® Guidance or register for a free trial.