stopsmoking started this topic @ 13:37 on 24/09/2004
I am considering starting up my new venture as a limited company.
Do I have to have been trading for a certain amount of time to do this and if so how long and is there any legal reason why I cannot set-up the company before trading commences.
Also I have seen the main advantage of limited company as being small salary and then to take a dividend - Is there a limit to how much you can take in any one month.
Thanks
Ian Clark
RE: Dividends - Is there a limit
James Smith | 24/09/2004 02:12 PM
Ian,
You can set up a limited company at any time you don’t have to be yet trading.
In terms of dividends these are normally the most tax efficient way to remunerate yourself. There are however lots of rules and regulations about the declaration of the things.
The limit for drawing dividends is the availability of "distributable reserves" within the company. This isn’t the same as the amount of cash in the bank account, it is effectively how much profit you have made, less the corporation tax you need to pay on your profits and a few other fiddly things your accountant will worry about.
If you have a search around on old posts you will see quite a few discussions on the topic or whether or not to incorporate. There are some good advantages in terms of credibility and the tax breaks but it is something you will need some help on in terms of getting your accounts all in order and all the regulations met so it is therefore more expense than being a sole trader.
Generally speaking there is a lot to be said for starting as a sole trader and incorporation when your business model has been proven. You precise circumstances will determine what is best you, and I am quite happy to take a little time on the ‘phone guiding people through this one.
Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
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