Leave money in Ltd business account or drawdown as salary

Folks

in current climate, if you have funds in co, should you draw down as salary and hold for rainy day in a personal capacity (plenty ahead) and run v. tight ship on business account, i.e. only keeping what you need for lets say two/three months to match monthly income projected/debtors on 45-60 days? Or is it better for company to have a stronger cashflow. Should the owner be selfish from personal view, as opposed to having a good set of accounts/cashflow. What is it that the banks prefer please?

Thanks

The banks will love to see cash in your company. They certainly won't be excited to see you've drawn down so much money that your debtors might not get paid. That suggests that any bank loans might not get paid either.

You should draw down your salary as usual - unless the company can't afford to pay you, in which case it's up to you who should get paid first.

Claire1956 said:

What is it that the banks prefer please?Thanks

Click to expand...

Stuff what the banks prefer! Do what suits you! Get some proper tax planning advice from an accountant. Good luck.

Hi

Have to agree with oopsbuddy, I doubt if the banks are worrying about you.

Regards

Hizzy

oopsbuddy said:

Get some proper tax planning advice from an accountant. Good luck.

Click to expand...

I can only echo this comment. Particularly if your company is what's known as a close company. There may be an tax liability (Close Company Surcharge) on interest earned by a company. The area is quite tricky so talk to an accountant / tax advisor.

You should make your decision as part of a medium or long term strategy - i.e. what are your plans for your business, what else could you do with money outside this company etc. etc...

I don't think the bank will care too much as directors salary (above a certain level) is generally a very controllable cost that can be cut at short notice if required.

Also, if you require personal money, it may be cheaper to take it out and pay tax now rather than over the next few years after the taxation commission report.

Is your pension fully paid up?

Well we put money into our pension monthly - but with the current stock market situation I am too ignorant to know if this is a good time to pour more money into it - but my gut would be hesitant to put more in that direction. I suppose the query was influenced by a number of local business people saying to gather up as much cash as possible and I assumed that this meant to have it directly accessible - BUT are we then feeding into what everyone is complaining about ......money not circulating. Was really looking for your gurus views. Thankyou for the replies and sorry for the delay in getting back to you.

You're making the assumption that money into pension automatically means money into the stock market which is not neccessarily the case. I would advise you to check into your pension and compare to a small self admin which is very flexible and can be well funded by your company.

Would agree with 8still8 if you could. Recently advised a small biz with a lot of cash sitting around to move it into Trust in a Small Self Administered Scheme. Once transferred into SSAPs creditors cannot get their paws on it if things go sour in the future.... clients were close to retirement and this might not suit everyone. Get some serious independent financial advice if your looking at doing this and pay a fee for it.