Looking for some tax tips to help your business thrive?
Here are some handy tips and advice help you navigate the complex world of business taxes…

No 1. Choose The Right Structure For Your Business

Introduction: Setting up a business requires a vital decision concerning its structure. There are multiple options available, each with its own set of advantages and limitations.

Why? Your chosen business structure impacts tax implications, decision-making processes, potential financing sources, and liability issues. It’s akin to choosing the foundation for your business house – its sturdiness affects everything built on top.

Recommendation:

• – Evaluate the primary structures – sole trader, partnership, limited liability partnership, and limited company.
• – Assess your risk appetite. For instance, a sole trader might be simplest, but it exposes you to personal liability.
• – Weigh the administrative burden against the benefits. Limited companies might involve more paperwork but provide liability protection.
• – Consult with a financial advisor to make an informed decision.

 

No 2. Choose Which Taxes You Pay

Introduction: Once your business structure is decided, it’s time to understand its tax implications. Different structures come with varied tax obligations.

Why? Navigating tax waters is crucial. It influences your profitability and ensures compliance with legal regulations. Moreover, understanding taxes can offer potential savings and prevent unintended liabilities.

Recommendation:

• – Familiarise yourself with tax obligations of your chosen structure.
• – Regularly update yourself on tax rates and changes. For instance, in 2023, corporations might be taxed between 19% and 25% based on profits.
• – Monitor thresholds and allowances, like the VAT registration threshold.
• – Seek assistance from a tax consultant for detailed planning and optimisation.

 

No 3. Take Advantage Of The Veil Of Incorporation

Introduction: If you’ve ever heard about the “veil of incorporation,” it refers to the protection a limited company offers its shareholders against personal liability.

Why? Choosing a business structure isn’t just about taxes or administration; it’s also about protecting your personal assets.

Recommendation:

• – Understand the extent of liability associated with each business structure.
• – Recognise the distinction between company assets and personal assets, especially in limited companies.
• – If risk-averse, lean towards structures that offer more personal protection.

 

No 4. Save Incorporation Costs

Introduction: The process of registering or “incorporating” your company comes with certain costs. While you can employ professionals, doing it yourself can save expenses.

Why? Every penny counts, especially when setting up a business. Reducing initial outlays can give your company a better financial start.

Recommendation:

• – Review available resources, like the GOV.UK website, which provides guidance on company registration.
• – Determine if online registration, which is typically faster and cheaper, is suitable for your business.
• – Ensure all paperwork is accurate to avoid costly revisions or delays.

 

No 5. Create Different Categories Of Shares In A Limited Company

Introduction: Within a limited company, there’s flexibility in designing your share structure. One approach is the alphabet share structure, which offers diverse rights to various shareholders.

Why? Having varied share classes can be advantageous, especially when needing flexibility in profit distribution or when accommodating shareholders with differing interests.

Recommendation:

• – Consider multiple share categories to provide more adaptable profit-sharing options.
• – Understand the implications of different share classes on voting rights.
• – Ensure that any share structure alterations align with the company’s articles of association.
• – Stay updated on relief conditions for different share types.

 

No 6. Keep Administration Costs Low

Introduction:

Embarking on the entrepreneurial journey? Choosing the right business structure is crucial. The sole trader model stands out as a simple, efficient choice.

Why? Setting up as a sole trader is straightforward, devoid of the intricate legal prerequisites linked with limited companies. Forget about division of profits, partnership agreements, and tedious paperwork associated with company incorporation.

Recommendation:

Opt for a sole trader model if you seek simplicity. However, be ready to notify HMRC about your self-employment status and manage basic record-keeping. Also, remember that the buck stops with you – all business debts fall on your shoulders.

 

No 7.  Keep All Business Profits For Yourself

Introduction:

Profits are the lifeblood of any business. As a sole trader, every penny earned stays with you.

Why? Unlike partnerships or limited companies, where profit-sharing or corporate structure might limit your income, being a sole trader means you’re the only beneficiary of your hard work.

Recommendation:

Before selecting your business model, weigh the benefits of sole proprietorship. It ensures that the fruits of your labour go solely into your pocket, reflecting directly in your tax liabilities.

 

No 8.  Maximise The Skill Base

Introduction:

Behind every successful business lies a diverse skill set.

Why? A sole trader might find it challenging to possess every skill their business demands. On the other hand, partnerships or companies can pool together a variety of talents.

Recommendation:

Whether you’re a sole trader, in a partnership, or running a company, always recognise the skills you lack. Don’t shy away from hiring experts or contracting specific tasks. Outsourcing can be both efficient and economical.

 

No 9.  Agree The Split Of Partnership Profits And Losses

Introduction:

Entering a partnership? Clarity in profit and loss sharing is paramount.

Why? Partnerships thrive on mutual trust and clear agreements. However, in certain scenarios, like family businesses, flexibility in profit-sharing can lead to tax advantages.

Recommendation:

Draft a clear partnership agreement but allow room for adaptability. Especially for family ventures, consider an agreement that offers flexibility, permitting profit reallocation for tax efficiency.

 

No 10.  Consider Purchasing An Existing Business

Introduction:

Starting a business from scratch isn’t the only way to entrepreneurship.

Why? Given the high failure rate of startups, buying an existing business can be a safer alternative. With a proven track record, these ventures often find it easier to secure financing.

Recommendation:

If you’re wary of the risks associated with startups, scout for established businesses on sale. Ensure you get professional advice to seal the deal in a legally sound, tax-efficient manner.

 

No 11.  Run A Franchise

Introduction:

Ever dreamed of being at the helm but lacked a business blueprint? Franchising might be your golden ticket.

Why? Franchising offers a mix of independence and structure. You run the show but under a proven business model and a recognised brand name. This combo often leads to better financing opportunities.

Recommendation:

If you’re new to the business arena or uncertain about your unique idea, explore franchising. While the initial costs might be higher, the long-term support and brand recognition can be invaluable. Brands like Costa Coffee or McDonald’s can be your launching pad.

 

We hope this information has helped, but if you want to find out more about this, or have any questions you want to chat about further, please feel free to get in touch on 07799 435 922 or email info@capoaccounts.co.uk