Sole Trader Vs Limited Company Tax Question

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socofbus

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I'm currently in the position of setting up a retail busines. However, I don't know if I should set up as a sole trader or a limited company as I understand that if I'm a sole trader, I'm personally liable for things if they go wrong, and that's fair enough.

In theory as a retail business, I think it would be more beneficial if we were a Ltd company, however, my wife wants to be a part of it as either company Director or company secretary but what I'm trying to work out as she is currently working full and we could not afford her to leave this job at the moment, in terms of tax if she did come on board as a company director or company secretary, how will this impact her if we went down this route, from a tax point of view, will she pay a higher tax etc....?

Any information would be greatly appreciate
 
Unfortunately not from what I can see, as most are explaining the difference and not specificly about tax for someone already working
 
socofbus said:
In theory as a retail business, I think it would be more beneficial if we were a Ltd company, however, my wife wants to be a part of it as either company Director or company secretary but what I'm trying to work out as she is currently working full and we could not afford her to leave this job at the moment, in terms of tax if she did come on board as a company director or company secretary, how will this impact her if we went down this route, from a tax point of view, will she pay a higher tax etc....?
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Your wife can come on board as a company director or as the company secretary without working full-time in the role, and without being paid much (or anything). So her tax situation need not be affected.

Being a company director does have responsibilities, though, and your wife shouldn't come on board unless she (and you) intend that she will be fully informed and fully involved in making decisions about the business. Even if she's not paid and is working full-time in an unrelated job, she may have to spend a good deal of her free time keeping abreast of what is going on in the business and participating in decisions that need to be made.
 
You need proper professional advice.

I heard a wise man counsel a few months back that in these startup situations it's normally better to start as a sole trader and switch later to a limited company if it all works out and the new venture survives. But there are not enough details here for any of us to know whether this is a viable idea here.
 
T McGibney said:
it's normally better to start as a sole trader and switch later to a limited company if it all works out
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I've heard this too. Firstly to avoid the costs and obligations of a limited company, and secondly it can be easier to get finance for a sole trader starting out (banks don't want limited liability stopping them getting repayment from a business with no track record).
 
From one of the search results deemed irrelevant by the original poster:
Brendan Burgess said:
In summary

Start as a self-employed person.

Change to a limited company when any of the following happens
  • You take on more than two employees
  • You become very profitable and want to stuff your pension fund
  • Your main customer insists on it
Click to expand...
 
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