Sole Trade, Company or Partnership
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Description
Should you trade as a sole trader, partnership or limited company? The answer isn't always straightforward, and recent tax changes mean the most tax-efficient option may not be the one you expect.
Sole Trade, Company or Partnership? provides a comprehensive comparison of the three main business structures, helping you understand the tax, financial, legal and administrative implications of each. Whether you're starting a new business, reviewing an existing structure or advising clients, this practical guide gives you the knowledge you need to make an informed decision.
Written in a clear, accessible style, the guide explains how changes to corporation tax, dividend taxation and other key legislation have affected the benefits of incorporation. It also explores issues such as personal liability, compliance obligations, profit extraction and succession planning, ensuring you can assess the wider impact of each trading structure not just the tax position.
Inside this guide you'll learn:
- The key differences between sole traders, partnerships and limited companies.
- How recent tax changes have altered the advantages of incorporation.
- The tax implications of each business structure.
- The legal responsibilities and administrative requirements involved.
- When it may be beneficial to change your business structure.
- Practical examples and expert guidance to support confident decision-making.
Whether you're an accountant, tax advisor or business owner, Sole Trade, Company or Partnership? is an essential reference for evaluating the most appropriate structure in today's environment.
Table of Contents
Table of contents
1. The attack on small company owners - changes 2016 to 2026
1.1. What was the old position for incorporation?
1.4. What about the 2023 corporation tax change?
2. Sole trader v company - before and after the CT increase
2.1. Are there still tax savings with incorporation?
2.2. What’s the position in a nutshell?
2.3. What are non-tax reasons for using a company?
2.4. Anything else to keep in mind?
2.5. What if I don’t need to extract all the profits each year?
2.6. Are there alternatives to leaving profits undrawn?
2.7. Will it be worth keeping the company if I can bring my spouse in as a second shareholder?
3.2. Are there different types of partnership?
3.3. Are these partnerships treated differently for tax purposes?
3.4. How are profits calculated for income tax purposes?
3.5. What if the partnership account period doesn’t coincide with the tax year?
4. Partnership vs company vs sole trade
4.1. What’s best going forward?
4.2. What’s the position at £60,000 profits?
4.3. What’s the position at £100,000 profits?
4.4. What’s the position at £175,000 profits?
4.5. What’s the position at £300,000 profits?
5. Disincorporation and the anti-phoenixing rules
5.1. Is disincorporation worth considering?
5.5. How do the TiS rules apply to changes of ownership?
5.6. How do the anti-avoidance rules apply to distributions during winding up?
5.7. When will the TAAR apply?
6. Improving tax efficiency for company owner managers?
6.1. How can I extract profit to maximise tax efficiency?
6.2. Is it tax efficient for my company to pay me interest?
6.3. What tax-free benefits can my company provide?
6.4. When does the exemption for mobile phones apply?
6.5. How does the exemption for mileage allowances work?
6.6. What are tax exempt trivial benefits?
7.1. Appendix 1 - Distributions in a winding up
7.2. Appendix 2 - Dividend checklist
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