ltd? Plc? Nothing?

[PoorDoggie]

what are the differences between - LTD, PLC and not having an ext on your business.

Also, are there any others?

Thanks
Tom

 

[will7]

Business Structures
LTD Means a Limited Liablity Company and is Private Limited. Limited Liability means that you can only be liable for whatever you put into the business, however, it is also more complicated to set up and costs a small amount of money.

PLC means a Public Limited Company. In a PLC, Limited Liability also applies, but has the added advantage (or disadvantage, depending on how you look at it) of making shares available to the public and for sale.

To become a Private Limited Company, at least 1 company director and 1 secretary are needed, however, to become a Public Limited Company, 2 company directors are required and 1 qualified company secretary.

Businesses with no suffix will be Partnerships or Sole Proprietorships. In a SP, the owner has Unlimited Liability. This means that if the company goes into debt, the authorities can take personal possessions to pay them back (car, house etc.). A SP is the easiest to set up, only requiring the owner to inform the Inland Revenue of trading within 3 months.

A partnership has the same qualities as a SP, however, it is two people owning it and so all profits must be split.

Tax
As for tax, a Sole Trader must file for tax at the end of the year. If this is below £4775 (threshold for 2005 - 06) then their tax return will be £0 - but they must still file. If their profits are over this limit, then they must pay a variable amount of tax depending on how far over the limit they are.

Limited Liability Companies (LLCs) pay corporation tax on income and profits and must also operate a PAYE system and this is all worked out via self-assessment.

VAT
For VAT (Value Added Tax) matters, any of the business structures can apply to become VAT registered and if profits are below £58 000, then this process is optional, however, should profits exceed £58 000, then they MUST become VAT registered.

Disclaimer
Please don't take any of this for 100%, I know most of this from personal experience and business advisors and they are trustworthy, but the rule applies - don't believe anything you read in forums about law - go and see a lawyer!

Anyway, I hope I helped you and gave you and idea about business structures, tax and VAT. I covered most of the important issues in business and hopefully I helped you!

Will7.

 

[True_Snake]

Thats a great description Will!

Thanks:D!

Reminds me of my business class days.


True_Snake

 

[The Equivocate]

So lets say (god forbid) I get sued for something on one of my sites. If im not an LLC, i could lose my car & house & such, but if im an LLC, they can only take company assets and my personal assets are protected?

 

[RTM]

So lets say (god forbid) I get sued for something on one of my sites. If im not an LLC, i could lose my car & house & such, but if im an LLC, they can only take company assets and my personal assets are protected?

Your location indicates the USA - and some of the advice posted was for the UK, but I would say that (basically) you have the idea down pat.

If the business is not formed as a somewhat independant standalone entity (such as a LLC or LLP, or Corporation) versus a sole proprietorship... then you as the sole proprietor are far more accountable for debts or judgments.

Rob - my 2 cents, consultant your accountant and/or attorney to be sure !

 

[will7]

Indeed, my post was all about the UK laws but I would imagine that some of the same applies for in the U.S. And yes, if you are an LLC and get sued, they can only sue you for whatever money you put into the business.

So, say, for example, you put £2 000 into the business. If you get sued, the most that that person can ever get is £2 000, even if the debts amounted to more. However, directors may need to take out personal loans.

In a Sole Proprietorship, say you had debts of £100 000 and you had put £25 000 into the business. The person who that debt is to be paid to can take that £25 000, and £75 000 worth of personal assets to pay back the debt.

 

[primacomputer]

Just wanted to point out that even if you have limited liability they can still take your house/car in cases of fraud, negligence, etc.

It's also probably worth pointing out that for $100-$200/year you should be able to get insurance that will cover you up to $1M or so for a company without limited liability.

Also, having no suffix often means a company without limited liability, but not always. It could be a DBA, branch office, or other business owned by a limited company.

 

[PoorDoggie]

Business Structures
LTD Means a Limited Liablity Company and is Private Limited. Limited Liability means that you can only be liable for whatever you put into the business, however, it is also more complic..............

wow... thanks a lot will7!

I run a small business, and I don't really get much money, only on the offchance really, do I still have to tell the inland revenue? (I am based in UK)

Thanks again
Tom

 

[will7]

Yes, you must still file for tax return. Just add up all your profits, and if they don't reach above £4775, then you pay £0 tax on your earnings, but you must still send of your self-assessment.

And also, you should have informed the Inland Revenue of your starting trading within 3 months of starting - have you done that? If you haven't, do it quick. You might be liable for a £100 fine, but if you leave it any longer, the fine will grow too

 

[PoorDoggie]

Yes, you must still file for tax return. Just add up all your profits, and if they don't reach above £4775, then you pay £0 tax on your earnings, but you must still send of your self-assessment.

And also, you should have informed the Inland Revenue of your starting trading within 3 months of starting - have you done that? If you haven't, do it quick. You might be liable for a £100 fine, but if you leave it any longer, the fine will grow too

er... well...

I will do that. I haven't really been trading - just creating websites for people. I did my FIRST one about 1 month ago!

You say add up my PROFITS... is that just profits?

Also, if I were to get a dropshipping account, and sell on EBAY for "pocketmoney" do I still have to notify the IR?

Thanks again
Tom

 

[will7]

Any form of trading as a business entity, no matter what form is classed as a business and therefore the IR must be informed.

And yes, it is just profits, however, on the self-assessment form there should be like areas for revenue, expense and finally, profits. As a business, you only pay tax on your profits.

 

[PoorDoggie]

thanks a lot will7
Tom

 

[will7]

Also, another point is this. Please note, I am in no way condoning, recommending or advising you to do the following, but it is an option.

If you are a very small business, then you could probably get away with not telling the IR nor paying tax. If you just do the odd site here and there and don't really have a definite income, this would be OK. But, once you grow, you will get known, and someone might find you out - a risky game to play.

I wouldn't advise that, however, was just saying that there are a lot of people who do it!

 

[PoorDoggie]

hmm... I'm only 14 yrs old and I didn't even know about the IR till my dad started talking about selling dropshipped items on EBAY, and he wanted to know the different types of business ext. Its all too complicated for me! :lol:

Thanks again
Tom

 

[will7]

Lol, I'm 15, run my own website design specialist company and am well on the way to starting up a full service web hosting agency. Hehe, I have a good head for business!

 

[PoorDoggie]

Lol, I'm 15, run my own website design specialist company and am well on the way to starting up a full service web hosting agency. Hehe, I have a good head for business!

wow... well done - for about 2 years now I have been telling my parents that I will become a millionaire, and although I try, I don't make much money. I have some really good ideas, but I don't have the time OR the knowledge/resources to apply them. Also, I ask for help from my friends, and all they do is sit there and look pretty! :bah:

Hope your web hosting company works well... are you using a reseller account?

 

[will7]

I will be using a reseller account to start off, and then, judging by my business plan, I should have grown enough by about a year to get dedicated servers. By the time I am 16 and have left school I want the company to be bringing in enough for me to get by without needing a job!

My friends are no help whatsoever, hehe, they just laugh coz they never think it'll work !! The only advice I can give you is learn, study and practice!

 

[PoorDoggie]

My friends are no help whatsoever, hehe, they just laugh coz they never think it'll work !! The only advice I can give you is learn, study and practice!

My friends don't laugh... they just take the pi*s! I think they respect me a lot though because they are all trying (and I say trying) to "run" their own businesses! Most of them are illegal though! :lol:

 

[will7]

None of my friends are starting their own businesses, they seem to be quite happy to settle down for an ordinary job, with average pay and an average life - I have higher ambitions than them!

 

[Zeeble]

The only thing with turning your self (sole trader) into a LTD is that first of all, you have to put money in because you have to buy shares.
And also the company pays tax, and then you pay income tax, so you get taxed twice.

Tax brackets are like this:

0% if the company makes under £10k

4% up to £50k

19% from £50k to £500k

40% from £500k up to £2mil

so thats alot of money you pay for limited liabilty.

 

[primacomputer]

Unless you have a weird M&A that disallows it shares can be allotted with no money changing hands. They needn't be paid up either.

 

[PoorDoggie]

:hehe: I'm lost now!

 

[will7]

Well, when you become a Limited Company, you pay corporation tax as well as income tax. This is based on percentages and these brackets are detailed Zeeble's post.

As for primacomputer's post, I think he/she was saying that you do not have to buy shares in the company. As a Director, you can allocate shares. And shares cannot be sold on the market unless you are Public Limited (Plc.).

Did that clear things up PoorDoggie?

 

[PoorDoggie]

thanks :D

 

[will7]

Don't mention it, glad to be of help!