INCORPORATE AS A SOLETRADER

Protecting your family and your house (and other assets)

For us the most important reason to incorporate must be the protection it gives you, your family and any other dependents:

The main risk of not being incorporated is that you are personally liable for any debts that your business runs up if your business runs into trouble. As a sole trader you would be foolish to not keep records and accounts to the same standard regardless if you are incorporated or not. So we don't believe this is a significant distinction, unless your are large enough to require a statutory audit.

You require a statutory audit if you have a turnover of more than pound;5.6 million and have a balance sheet total of not more than £2.8 million. Small and medium sized companies can file abbreviated accounts, but still need to produce full accounts for their shareholders and again we would argue you need a decent set of account to manage your business.

Tax benefits of incorporating

" Firstly, UK income tax rates are far higher than corporation tax rates. Secondly, company directors may pay themselves dividends from the company which are subject to much lower tax rates than any salary income."

"If you have a spouse who is also a director in the company you may split your income, which should also save you a tidy sum in tax."

"You can legitimately avoid tax by paying into a pension scheme. Another example is that companies can use other pension options to invest up to 50% in property for the company"

"You can gradually transfer shares and thereby completely avoiding inheritance tax."