All business owners should evaluate whether it is best that they trade as a sole trade/partnership -unincorporated, or as a limited company -incorporated. Each has its advantages.

When first starting up it is simpler to start unincorporated - there are less formalities. Also a tax advantage if initial losses are expected, as these may yield a tax refund of any previous years tax paid. (Subject to rules.)

A limited company has more formalities with which to comply and is generally more costly of fees.

The main advantage of a limited company can be limited liability. Losses are limited to the resources of the company. Although lenders often force this to be overridden with personal guarantees.

The second advantage is the tax regime. With dividends payable free of national insurance and only taxed at higher rates, there can be considerable tax savings. Added to by the fact that Corporation Tax for small companies is now 20%.

If you are already trading unincorporated, the timing of any change can affect your tax bill.

You are advised to take the advice of an accountant before proceeding.

We have devised an aide memoire to illustrate the range of factors to be covered on incorporation.

Click here to view.

We continue to advise that you seek professional advice before proceeding.

Although the decision to incorporate is not one to ‘run through a spreadsheet and select the best result’ as a basis for further evaluation this is a valid starting point.

Click here to download our spreadsheet for you to enter in test data to see the results.

This spreadsheet can only be taken as indicative. If it shows savings, and your accountant has not already advised you of the potential - then please phone us.

Often it is not the case that a whole entity should be incorporated. Taxation of property is generally more favourable when held personally.

So it may be the case to retain property in the name of individuals and rent it to the company.

Again the advice of an accountant is important here, to think of all angles.