Ltd Company or Sole Trader?

[DGR]

Any views on which of the above is more preferable from an operators point of view?

Some insurance companies would seem to rather the ST approach (individual liability), whereas other like the idea of limiting liability through Ltd Co status.

Assuming you've got good insurance, does it really matter?

Any views?

D...

[tim griffin]

Go to www.fsb.org.uk for federation of small business or contact the inland revenue for information of starting your own buiness.
i trade as Sole trader and have employers liability along with buiness liability
hope this helps
regards tim
www.griffmarineservces.co.uk

[DGR]

Cheers for that.

Who do you use for your insurance?

Dylan...

[John Kennett]

Dylan

You may find that forming a limited company actually gives you very little protection. If you are negligent (and if you screw things up then you are quite likely to be found negligent) then as a director you are still personally liable.

I would recommend getting a good accountant who can advise on which is likely to be more tax effective for you.

John

[scm]

Dylan,

I have just done my insurance through Euromarine insurance Ltd and have been very happy with the cost for comm insurance with tuition etc etc £451 for the year.
Regards
Stuart

[DGR]

Thanks everyone!!

John, I've spoken to an accountant who gave some very good advice but the ST or Ltd Co direction wasn't particularly clear. He thought it might be down to insurance issues, but if it is just down to taxation I will go the ST route - much easier to set up and manage.

Thanks for the help!!

Dylan...

[Jon]

Sorry I didn't see this before as it is in the commercial section...

As an accountant I often get asked this question and it's becoming less relevant for liability protection and a much more tax driven answer. The courts (and the claimants) seem much more willing to consider (try) "lifting the veil of incorporation" in cases of negligence these days and looking through to the actual operators.

Good insurance cover is your best protection along with good record keeping and training for all - but then you know that!

The tax changes in the budget have made some limited company situations less tax advantageous but the result should be down to good planning and information.

[Dave Clarkson]

Limited liability isn't really about negligence issues and IMHO rightly so, it's more of a case of limiting any creditors (people /companies you owe money to) your business has, should it go tits up.

As a sole trader you are personally liable for any of your company's debts. So if the worst happens, any creditors fuel suppliers, banks, Inland Revenue etc would be able recover the company's debt from you, perhaps by selling your house or shiney new BMW 530!!

As a limited company unless you have been trading illegally, in the knowledge your company cannot pay it's way, your creditors could only recover the money from the company by say, forcing the sale of it's assets.

[DGR]

Thank you for the info!!

I wasn't thinking of it in an 'avoiding responsibility' or 'how to get away with negligence' point of view - only whether there were any major reasons to go one way or the other - and as Jon points out, it turns out that the reasons are largely tax related.

However, it is good to go through the 'what if' scenarios, incase I find myself on the wrong end of a negligence claim or similar. While I don't intend for this to happen, and will train/practice to make sure it doesn't - you just never know do you!!

It seems that Sole Trader is the way to go (at least initially), as the intention is to start small (and probably stay that way ), but I've always got the option of change to a Ltd company if it becomes wildly successful (and buy a BMW 530 ).

D...

[Paul Glatzel]

Dylan

I would suggest speaking to an accountant before you make your decision as what is right for one will be different for others due to differences in personal tax situations which in turn will relate to the likely profit of your 'business'

Can recommend one if required

Paul

[DGR]

Thanks Paul.

I've spoken to an accountant, and he said much the same thing. Recent changes in the law mean that Ltd Co status actually doesn't protect you (or your assets) if you are found to be at fault - and it is easier (and cheaper) to set up as a Sole Trader.

As far as I can tell, at least initially, from a taxation point of view ST would be simpler to set-up and manage.

And from a risk point of view, I think I'll have to rely on good insurance, lots of training, and whatever common sense is left between my ears (not necessarily in that order)!!

Dylan...