Ask a Law Question, Get an Answer ASAP!
Hello, this is Jim and I am a dual-qualified lawyer (UK and Republic of Ireland) and happy to help you today.
What would you like to know about the company?
Hi there, a limited company's main advantage is that you have protection - as a director you are only liable to the amount of share capital paid up (£1 is the minimum for a limited company), so if there was ever a problem and a customer sued, it would sue the limited company and not yourself. Corporation tax is payable at 19% for profits up to £300,000.
Whereas for a sole trader, you are personally liable if things go wrong and you pay income tax instead - you could use an accountant but if the profits are low then it shouldn't be required.
You can make the limited company dormant if it is not currently trading. It may be as well to continue trading as a sole trader and if things improve (you make sales and profits) then consider going to a limited company with the added protection it gives you. You do not say if you are in this alone or if you have business partners?.
Thanks for your patience. So I mentioned that there is limited liability with a limited company, which is a large benefit. Another one is only having to pay corporation tax on profits (whereas a sole trader must pay tax above their personal tax allowance - £12,500 for tax year 2019/20). There is a negative with a limited company which is the onus on the director to file annual accounts - an accountant will likely be needed for this unless you are adept at accounting and finance.
For a sole trader there isn't this burden but they still have to do a self assessment.
Also a limited company has a better perception among the general public - it looks more official to them and gives them peace of mind as director's accounts are easily obtainable online - so the health of the company is more obvious to anyone who wants to look in to the company further.
So at the moment with the fact you are not generating that much in the way of profits you may as well continue as a sole trader. If you start to generate more sales then the extra burden of operating a limited company would be worthwhile (the accountant's fee would be justified and so on).
I hope this helps – if you can please give a positive rating by clicking 5 stars (at the top of your screen), I can answer any follow up questions at no extra charge and I will be credited for helping you today.
Hi, yes, you can apply to make it dormant given the situation. You can still file the accounts yourself - it is easily done. You can do it online here: www.gov.uk/file-your-company-annual-accounts
If you are self-employed, you would still be a sole trader too. You just need to file a self assessment for yourself. You can have a personal account or have a personal one and a business account (making it easier to operate as a sole trader).
Hi there, I am not a tax lawyer unfortunately, so cannot answer that for you. There are such lawyers on this site though -
I will therefore opt out to let another expert assist you with your question going forwards. Please do not reply to this message as the question will stay with me and there will be a delay with the reallocation.
Hi thank you for your message, I see well in that case in effect you would have one tax return showing your income and any deductible expenses from your income. Therefore, your expenses would be combined and deducted. I hope this helps, if you can please accept my answer and rate me 5 stars (in the top right of your screen) then Just Answer will credit me for helping you today.
Apologies ignore the rating I see that has been done.
Hi thank you for your message, well from what you have said, I gather that in essence what this comes down to is you currently have two different businesses in effect. You are closing down your limited company, which means you will now have two forms of income which will be subject to income tax these are your freelance work and your clothing business. It does not matter what your sources of income are you do one income tax return and therefore any allowable expenses that should be deducted from the income are submitted in one return. I hope this helps, if you can please accept my answer and rate me 5 stars (in the top right of your screen) then Just Answer will credit me for helping you today.