This month we are focusing on: Different Trading Vehicles to Consider for your business
And this week are looking at: What is the difference between a sole trader, partnership, and limited company?
A partnership is simply a number of individuals working together – so for the purpose of this tax tip we are treating partnership the same as a sole trader vs limited company
When a sole Trader – you are the business. You can withdraw any amount of the profits, as it is not classed as remuneration, as you are not an employee. For purposes of tax and NI you are assessed on your personal tax return against the profits of the business each year via your tax return. The profit will be generated from the income less the allowable expenses of the business.
A limited company – the business is a separate entity – the owners of a company are the Shareholders. Often in a small company, this is the same as the directors who are the officers of the company. For purposes of tax and NI there are more restrictions on how you take money out of the company, this may be by payroll or dividends from profits available. The company submits a set of accounts and tax returns separately each year.
If you know of a local business that needs help with business structure please do pass on our details