Transfer to a Limited Company (Incorporation)

Considering changing the legal status of your business? There are a number of factors you need to consider.

If your SME is proving successful, you will most likely come to the point where you will need to consider incorporating your business from a ‘sole trader’/’partnership’ to a ‘limited company’ (LTD) for taxation & administrative purposes. The process of incorporating your business can be complex and challenging, with a number of strategic decisions to be considered carefully. It’s therefore prudent to obtain practical assistance at this time.

What is incorporation?

‘Incorporating’ a business refers to the process of converting your sole trader or partnership status into a limited company and is a common undertaking for many businesses, particularly in periods of growth.

What are the benefits?

There are broadly two benefits to incorporating a business. Firstly, unlike a sole trade or a partnership, a limited company is a separate legal entity; in most cases, this means the personal assets of the shareholders and directors are not at risk in the unfortunate event of a business liquidation or litigation action against the company by a third party.

The other significant benefits can be obtained in the taxation advantages offered by this arrangement, some of the more common examples being:

Profits retained for reinvestment in the business are taxed at the lower corporation tax rates, as opposed to the higher income tax rates and national insurance.

The total tax payable on profits extracted from a business is often lower from a limited company, as the taxpayer can avoid national insurance contributions by distributing profits as a mixture of salaries and dividends to shareholders.

There may be other avenues for extracting funds from the business in a tax-efficient manner that are not available to sole traders and partnerships, including interest on directors’ loans, rental income for the use of assets owned personally, and provision of certain benefits-in-kind that are exempt from charges to income tax on the director.

Who should consider incorporating their business?

All individual cases are different, but the benefits to incorporation are typically greater as a business grows larger, although small businesses can still reap the rewards that come from trading through a limited company. Any individual with a sole trade or a share in a partnership should consider whether this is the best way forward for their business.

Should I incorporate my business?

When considering if incorporation is the right move for your business, there are several factors to take into account. Generally, if you’re looking at the possibility of a change of status, your business is typically experiencing significant growth, allowing taxable efficiencies to be made and the possibility of taking advantage of other significant benefits. However, it should be noted that for some businesses, it is beneficial to remain as they are. Contact us today to see how we can help you with your business needs.

Whatever your situation, our team of tax advisers in Nottingham can help you ensure your incorporation is completed correctly. Contact us today for further advice or to discuss the next steps by calling us on 0115 955 5500 or emailing enquiries@pagekirk.co.uk.

Why choose Page Kirk for your incorporation requirements?

Incorporating a business is a reasonably straightforward process, but due care and attention needs to be made to ensure the various elections to HMRC are applied for, so that you do not incur unnecessary income tax charges in the tax year in which the process is completed. Our tax advisers can assess your individual circumstances and advise you on the best way to incorporate your business.

At Page Kirk, our chartered tax advisers are specialists in incorporation and can provide you with all the advice you need, taking the hassle out of your obligations so that you can focus on the things which matter most. We offer:

A dedicated tax department with a wealth of experience and expertise
Tax consultants who are Chartered Tax Advisers, ensuring sound and up-to-date advice
A single point of contact, so you aren’t being passed from pillar to post

A reliable, professional, tailored and personal service
Digital expertise to deliver efficiencies through advanced technology solutions
Nottingham-based tax advisers with national and international reach

With Page Kirk, not only will you be compliant with laws and regulations, but you will also be assured that our team will recognise areas for improvement, such as structuring your finances in the most efficient way and making sure you take advantage of reliefs and allowances available to you.

What’s next?

Arrange a consultation to find out how we can help you. Call us today on 0115 955 5500 or email enquiries@pagekirk.co.uk.

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If you already have an accountant, it’s quick and easy to switch to Page Kirk.

Page Kirk is a leading accountancy practice in Nottingham, but we service clients across the country, so wherever you are based, we can help. We will assign you an accountant to assist you in growing your business and improving its efficiency. Contact us to find out how we can help you today.

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From ensuring that you comply with your statutory requirements, to navigating the scaling-up of your business, through to effective profit extraction and dealing with your tax affairs, Page Kirk Nottingham accountants are here for you every step of the way.

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