ambercelery started this topic @ 21:21 on 03/11/2004
Hi
I am wanting to set up a business with an ex-colleague of mine. We are planning on creating some software package and being able to sell it to companies (at some point in time) and also provide support for the package we have created. We are trying to weigh up the pro's/con's of both limited companies and limited liability partnerships.
Can anyone help me on this? The kind of information I am interested in are the tax implications, national insurance etc.Once(hopefully) the company starts to make money, how do we go about paying ourselves. Do we pay ourselves a wage or in shares options etc? What about capital gains tax?
If we were to take on some contractors to help with development, how would be the best way to pay them too?
Also - if I was to keep my full time job and work on this development in my spare time would it have any implications from a tax/NI issue?
Any help to compare the two types of companies would be greatly appreciated. or if anyone knows of any useful web links with this information on - please let me know.
Thanks in advance.
RE: Limited Company or Limited Liability Partnership
James Smith | 04/11/2004 02:07 PM
"Amber"
There is some good information about limited companies in the main sections of this site and on the business link website.
In a nut shell being a limited company = more work and cost, but should save you in taxes and look more credible.
On your specific area it is often beneficial to hold the IP rights to the software personally as this allows a few tax planning opportunities if things work out well for you. These rights can then be leased to a limited company that you own to sell the software to the users.
Generically whilst testing the market being a sole trader (which is the same in tax terms as being a partnership) is sensible, especially if you are in full time employment as any losses can be offset against your main income. If things go well you can easily incorporate and start making the associated tax savings. You will then have money to pay for proper advice about how to run the company properly and also to structure the company and the remuneration strategy you wish to pursue.
This is quite a common question and it worth a hunt around searching on earlier posts in this area to gather additional information.
Having a job and a second income is not an issue.
I hope this is of help to you
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Limited Company or Limited Liability Partnership
Setting up LLC | 27/10/2008 07:16 PM
Many entrepreneurs choose to pursue Setting up LLC for tax reasons. LLCs avoid "double taxation" because the income of the LLC itself is not taxed at the company level. Instead, taxes on profits and deductions of losses are computed at the individual level on the personal tax return of each LLC member (owner). LLC owners can elect for the IRS to tax the LLC as a sole proprietorship, partnership, C Corporation, or S Corporation. Owners make this election through the IRS after the company forms with the state.
