Registered a Ltd company for sole trader?

[dfefferkay]

Hi, i hope someone here might know better than me and probably has been through the process.

I recently transitioned into self employment working as a sole trader. I know i have to get my PL insurance sorted, and ive branded myself (not in the cattle way) to help with advertising but do i need to register my business name and do i need to register it as limited to reduce the risk to my assets, ie house!

thanks in advance for your help.

Darren
Pk Plumbing & Joinery

 

[IDCHAPPY]

Yes, your best going to be a PLC mate, me and my dad started as sole traders working in partnership but the advise was to go down the PLC company route. The you get to add PLC after your company name... Whoop 😉

 

[snowhead]

Going LTD has costs involved.
As a start up it may be too early to commit to this.

However when choosing a Business name you need to;

Pick a name, check the Domain name (online) is free and check the company name (online) is free all at the same time.
Then register the Domain and the Company name at exactly the same time, otherwise you could loose one of them.
You may find you can't have what you want i.e PK Plumbing, as it may be in use.

You can register at companies house and keep the co.name dormant till you are ready and busy enough to go into a Company.
Registering as a Company protects your trading name.

 

[lame plumber]

of note, PLC is normal term used for public limited companies, bit early for you yet. By going limited, you will restrict the amount of credit any merchant will give you as the limit is the bit they don't like as if you have 100 £1 pound shares between 2 directors, technically each of you is only responsible for £50 debt each max!, hence why your credit is ziltch and the banks will still ask you for personal loans and attach them to your home!

Also being a director of a ltd co can cause you to breach the law in numerous ways and most of which have a maximum punishment of a prison term! You'll end up having to do 2 sets of tax returns each year one for you and another for companies house, trouble if you dont do co house ones on time/correctly.

and regards limited liability, get things wrong and there is no limit have a peek on here under directors responsibilities 🙂 https://www.gov.uk/running-a-limited-company

My thoughts are and will be till I have a large workforce and warehouse (as if) be a sole trader, only take on what you can afford, run tight accounts and keep debt at bay, the best way being - if you cant afford it dont buy it, then you'll sleep better and trade longer.

 

[MOSSEP]

As above, its quite a headache running a Ltd company. Do a lot of research first.

 

[dfefferkay]

Thanks, I've already secured the domain and have functioning site hosted. I have a limited knowledge of networking and web publishing but im happy with the foundations to build on. I'd appreciate any feedback

PK Plumbing and Joinery

RE companies house thanks i hadn't thought of protecting the name and i've checked and it is still available.

With returns, i already have a UTR from previous self employment can i use this and fill my returns as self employed or will it have to be filled as a business?

 

[stevetheplumber]

you definitley need an accountant to do tax returns fro ltd company

 

[lame plumber]

Thanks, I've already secured the domain and have functioning site hosted. I have a limited knowledge of networking and web publishing but im happy with the foundations to build on. I'd appreciate any feedback

PK Plumbing and Joinery

RE companies house thanks i hadn't thought of protecting the name and i've checked and it is still available.

With returns, i already have a UTR from previous self employment can i use this and fill my returns as self employed or will it have to be filled as a business?

as above 2 sets of accounts if you go limited and twice the accountants bills, going ltd at start up will probably cause you more hassle than its worth and limit your ability to trade!

 

[albatross]

Limited Liability Partnerships or Company and other formations

My accountant used this lot to set up my Ltd company.

 

[thompsonbrown]

Ltd comes with benefits such as reduced tax on dividends etc... Also will help your credit rating as you are employed rather than self employed.
A lot of the benefits that used to be associated with Ltd have gone but a decent accountant will help with that.
Be prepared for around £2500 in accountants bills for book keeping and end of year returns

 

[jonnyswamp]

If I were you I'd concentrate on getting the business up and running for minimal costs in the first couple of years, sole trader for now, less accs fees and headaches etc
When you've established yourself then decide if its worth it

 

[thompsonbrown]

If I were you I'd concentrate on getting the business up and running for minimal costs in the first couple of years, sole trader for now, less accs fees and headaches etc
When you've established yourself then decide if its worth it

Thats the way I would do It aswell.
However starting off Ltd is an advantage If you can afford the additional costs in your first year

 

[SafeGasInstall]

Had a ltd and now switch to self employed ! Easy life 🙂
LP has given very GOOD advise there ....do NOT go ltd unless you have turn over of min £500,000.00 if you only have about £100,000.00 then you will waist big money on accountants fees

 

[Sag]

Ltd has some great advantages. Accounts fees should not be the main/only reason not to go Ltd, the account (if any good) will easily save you more than their fee.

The tax benefits can be significant!

If you have a business plan or even a financial forecast, sit down and go through it with an accountant. You'll be surprised at what you can miss out on without knowing.

As far as trade accounts and credit, that all depends. My personal credit rating is pretty crap. My Ltd credit rating is excellent with £3k credit limit with just one supplier.

 

[cr0ft]

Thanks, I've already secured the domain and have functioning site hosted. I have a limited knowledge of networking and web publishing but im happy with the foundations to build on. I'd appreciate any feedback

PK Plumbing and Joinery

RE companies house thanks i hadn't thought of protecting the name and i've checked and it is still available.

With returns, i already have a UTR from previous self employment can i use this and fill my returns as self employed or will it have to be filled as a business?

The biggest bit of advice I could give is make sure your name is one that will grow with your business. As people on here know, I started as a plumber and trained as an electrician too about 3 years in. Dripbusters Ltd is a great name for a plumbing company, but certainly not for an electrical company. Changing it now would be too expensive though so I am stuck with it.

PK Plumbing and Joinery is presumably your initials and the trades you do. What if you also want to add in other trades later, i.e. move towards general building?

 

[cr0ft]

If you keep your book-keeping up to date (which any business owner should do of course) then you can keep your accountancy fees down hugely at the end of the year, plus you will know what your business is actually doing for you each month.

There are many good accounts packages you can buy which will make the tax return process very straightforward, i.e. one that you can complete yourself at the end of the financial year.

I have done my own each year (I started as a Ltd company from the beginning of my company). Touch wood, so far I have not had any inspections etc so they must be happy enough with my accounts.

 

[MOSSEP]

Here’s a few things that I didn't realise when I went from a S/T to Ltd.




Most wholesalers will make you sign a waiver with them stating that the director will become liable for for any money’s owed if you go bust.


Van insurance would increase massively as its in a company name and I would lose my no claims bonus that I had built up myself.


That there would be 2 sets of accounts to file every year, as well as other things to companies house. This obviously results in a much bigger accountants fee.


That you still have to pay higher rate tax if your earnings take you into the 40% tax bracket. Although the company only pays 20% tax, you cant then pay all the profit to yourself and not pay higher rate personal tax.


You will need a new bank account and it may be hard to get any overdraft you once had given to you again.


The stress involved with trying to work out how to set up PAYE and other things relating to HMRC. The amount of time I sent on the phone to them was ridiculous. I now you can get an accountant to do it but then its more and more fee’s.


Im sure there are more but thats all I can think of at the moment. To be fair, once you have got your head around it and settled into the new way of doing things you get used to it, but for 6 months or so it was quite a shock. For a whole I wished I had never bothered!


Anyone else got any good pointers that someone going Ltd should know?

 

[lame plumber]

Ltd has some great advantages. Accounts fees should not be the main/only reason not to go Ltd, the account (if any good) will easily save you more than their fee.

The tax benefits can be significant!

If you have a business plan or even a financial forecast, sit down and go through it with an accountant. You'll be surprised at what you can miss out on without knowing.

As far as trade accounts and credit, that all depends. My personal credit rating is pretty crap. My Ltd credit rating is excellent with £3k credit limit with just one supplier.

You wont save tax on anything if you don't owe any tax in the first place!!! If your a start up company, youll not be paying anythinh like enough tax to warrant the hassle of going ltd, ask a decent accountant not one of the online rogues charging to set up ltd companies. Fm memory it only costs about £200 to diy, and of note £3k credit with one merchant is peanuts in the big picture. Just be advised or regret it sooner rather than later, if you dont have a tax bill putting you in the 40% bracket, being limited is pointless, as is going vat registered to early.

 

[Sag]

By being ltd you can pay dividends in order to help keep you below 40%. Stop scaremongering If you don't fully understand the benefits.

As I said, best thing is for the person to talk to an accountant not that they 100% should go ltd.

Your missing the point with the credit account, it wasn't about tje credit limit. I personally wouldn't have got credit. However the LTD is a separate legal 'person' an can get credit.

 

[Sag]

Going VAT registered can also benefit you if you do a lot of commercial work.

So, without knowing exactly what the OP intends to run the business like, all of our opinions are just that - opinions!

So, best thing to do is still talk to an accountant and discuss your business plan with them. They'll give you relevant advice rather than personal opinions of people over the net.

 

[lame plumber]

By being ltd you can pay dividends in order to help keep you below 40%. Stop scaremongering If you don't fully understand the benefits.

As I said, best thing is for the person to talk to an accountant not that they 100% should go ltd.

Your missing the point with the credit account, it wasn't about tje credit limit. I personally wouldn't have got credit. However the LTD is a separate legal 'person' an can get credit.

funny thing is I know an awful lot about it as having been the company secretary for business with multi (thats lots to you) million pound turnover ltd co. As the financial officer in charge of all aspects of the company I know the in and out of when you need to be ltd or not, so some who knows a little and shouts a lot shouldnt call others scaremongerers. If you read what I said, you dont get start up companies hitting the tax levels required to make it worthwhile going for ltd status esp if you are a bloke on your own. As far as getting credit, in my opinion, people who dont qualify for credit personally shouldnt be able to get it as a ltd co either, as the same people are running the accounts and it only leads to misery for all involved.

 

[MOSSEP]

Accountants strand to earn a lot from you becoming Ltd, so choose who gives you advice carefully.

 

[BLOD]

I work and pay tax as a sole trader, but have had my company name registered as limited for a few years mainly to stop anyone else using it - all this takes is a couple of easy online returns each year costing less than £30 to keep the name dormant
As far as I'm aware at present it becomes beneficial (tax wise) to trade as a ltd co when your taxable income is more than about 16000
As a ltd co You pay yourself the minimum wage on which you pay full rate income tax.
The rest are your wages is paid in dividends on which a reduced rate of tax is paid.

 

[Sag]

Start ups can very easily hit VAT and 40% personal tax thresholds.

And there is the financial protection of personal assets if your ltd.

I used to balance a £40m (that's many many multiples to you) account daily for a finance company so am well aware of what I'm talking about thanks.

 

[lame plumber]

oooooooooooooooooooh get her 🙂

dont forget the financial protection of ltd companies isnt what it used to be despite what some people think.

 

[Sag]

Lol, what a muppet.

 

[stratplus]

What effect does being a sole trader have on your home being at risk?

 

[Sag]

As a sole trader you are personally liable for ALL the financial implications of your company as your company is essentially you trading as xxxx plumbing & heating etc.

Taxes, fines, supplier accounts, salary to any staff etc. The only 'protection' would be your PL insurance which is not going to protect you from everything anyway (ltd or not).

So short answer, your home, car, savings and all assets are at risk when a sole trader.

 

[lame plumber]

as they are if your a director of a ltd company and haven't conducted your trading responsibly and with due care.

 

[Sag]

You don't have to run a business without due care and responsibly for it to fail. Just look at what the recession did to businesses across the UK.

 

[lame plumber]

You don't have to run a business without due care and responsibly for it to fail. Just look at what the recession did to businesses across the UK.

not an excuse in the eyes of the law though is it.

 

[Nostrum]

Lame, I do get the feeling you see things as having the 'if I'm not doing it, it's not right' type attitude in this thread.

Thousands of companies are incorporated every year and as many also go to the wall. Unless you've been completely irresponsible then you have no reason to worry although as already said, most lenders of credit will require a personal guarantee these days. Also, banks will lend money but expect the director to take liability of the repayments.

There are tax gains, and increased accountancy charges.

My business is not limited, but I hold the ltd name declared as dormant to protect it from being used by someone else. It may be that I go ltd this year as I am taking on some more ambitious projects, and would not want to risk my house etc but that doesn't make me irresponsible. Many business decisions carry risk otherwise everyone would be doing it already with nothing to loose. Banks etc recognise this, but obviously don't want all the risk dropped on their lap, hence the personal guarantees.

Someone mentioned choosing the name carefully, in reality it's not a major issue. You can be XYZ ltd trade as ABC plumbing if you like.

There has to be a logical reason for going limited though, simply wanting the 3 letters after your name is silly. You'll get no kudos for it, some tax benefit if you are earning enough, and some hassle from lenders and increased overheads. At the early stages I would concentrate more on your route to market, secure the trading name if you feel necessary and make the business profitable.

 

[lame plumber]

Not it the least mate, but I have seen a fair few people convert to ltd for all the wrong reasons and they sought advice some of the time.

the main reason is to attempt to protect your private assets and distance yourself from your trading company as well as getting a different set of tax liabilities to work with. As Ive tried to make clear, if your trading with a profit of around £40k, you could save some £2900 or so in tax if your ltd. But then you need to take into account the additional costs that youll incur running the ltd co and at this level theres probably no point in going ltd for tax purpouses. Also the ltd side has been watered down, and if your creditors believe youve been complicit in the failure of your co then you can be hounded by them still for monies owed. so defeats the point of being ltd somewhat. Finally none of my comments were aimed at you personally, I was responding more to another op, so back in the arms and buy me a pint 🙂

 

[Chalked]

Good profit and high turnover with risky clients..... Go ltd

average profit, average turnover and good credit control. Don't bother.

 

[Sag]

Also, there are tax benefit of getting 'key man' insurance which can act as a kind of life insurance policy. A good IFA can guide you on that too.

 

[lame plumber]

Also, there are tax benefit of getting 'key man' insurance which can act as a kind of life insurance policy. A good IFA can guide you on that too.

can tell your background, 🙂

 

[Sag]

Really, what's my background then?

 

[Nostrum]

You've only got to look at the way some companies are wound up or liquidated in very questionable ways to assume that proving foul play is harder than it would seem.

As a director you must act in a way that is of most benefit to the company. I would imagine that paying yourself an unsustainable wage intentionally, or selling assets to yourself at ridiculously low prices would account to some form of misconduct and could land you in the poo.

Generally though most directors run the business with all good intent and purpose. Whether they make the right business decisions is another matter but I think you would be hard pushed to be liable for a mistake or bad judgement action to put you in a position of personal liability. I'm sure this is why administrators are brought in for PLC's, to check the companies accounts up to that point and ensure the damage is somewhat reduced. After all, shareholders will want to be sure they haven't been shafted by the directors?

Your right though setting up a Ltd company should not be done without careful consideration and weighing put he pros and cons, of which there are both.

That said, in your example you've proven the financial gain to be had in being limited, even if the accountancy bill added £1500 you'd still be £1400 p/a better off, that's a whole 8hrs work for us gas engineers.

 

[lame plumber]

you got a cheap accountant there 🙂

 

[Nostrum]

Or maybe yours is expensive? :sultan:

For some reason I can only choose smileys from racial minorities on my ipad.. This is the only one that seems to work.

 

[Ray Stafford]

Lots of different points being mixed together here.

There are three main reasons that our customer choose to go Ltd:

1. To protect their personal assets from business risks
2. To minimise their tax liability
3. If the business is owned by more than one person, a ltd co shareholding structure gives more flexibility

The benefits of 1) are not as clear-cut as some people think, but they are real. Many wholesalers (including us) will ask for a directors guarantee unless the ltd company has significant assets and several years trading history. The bank and other lenders are likely to take a similar line. My personal view is that the best way to protect those assets is to trade in such a way that you don't enter into commitments that you can't fulfil. I appreciate that this can be difficult when subbying on new-build for example, which is why we don't chase customers who specialise in that line of work, because they are inherently risky.

To be honest, you are unlikely to be pursued by the authorities if your Ltd company goes bust unless
a) you owe the taxman lots of money or
b) you do it over and over again

The tax liability issue depends on individual circumstances. The best advice our accountant ever gave us was "run your business to make a profit, not to avoid tax". Unless the sums are quite large, you need to be aware that you might find yourself running up accountancy bills, and using up your own time on stuff that could have been earning money.

The business of mixed ownership probably doesn't apply in this case. I tend to be wary of new starts that are run by more than one person anyway - new partnerships often dont survive the growing pains, and sleeping partners tend to wake up quickly if they dont get the return they were expecting.

 

[Ermintrude]

Another intelligent post from ray. Bet he's just a vegetable at work !

 

[lame plumber]

Ray gives it from the other side of the fence 🙂

 

[Centralheatking]

Very sound advice from Ray maybe he did not spell it out but suppliers will not always allow credit accounts to small and new ltd companies cause when they go tots up ray and co cannot get the dosh back but with sole traders etc they can take your truck wife etc CHK

Lots of different points being mixed together here.

There are three main reasons that our customer choose to go Ltd:

1. To protect their personal assets from business risks
2. To minimise their tax liability
3. If the business is owned by more than one person, a ltd co shareholding structure gives more flexibility

The benefits of 1) are not as clear-cut as some people think, but they are real. Many wholesalers (including us) will ask for a directors guarantee unless the ltd company has significant assets and several years trading history. The bank and other lenders are likely to take a similar line. My personal view is that the best way to protect those assets is to trade in such a way that you don't enter into commitments that you can't fulfil. I appreciate that this can be difficult when subbying on new-build for example, which is why we don't chase customers who specialise in that line of work, because they are inherently risky.

To be honest, you are unlikely to be pursued by the authorities if your Ltd company goes bust unless
a) you owe the taxman lots of money or
b) you do it over and over again

The tax liability issue depends on individual circumstances. The best advice our accountant ever gave us was "run your business to make a profit, not to avoid tax". Unless the sums are quite large, you need to be aware that you might find yourself running up accountancy bills, and using up your own time on stuff that could have been earning money.

The business of mixed ownership probably doesn't apply in this case. I tend to be wary of new starts that are run by more than one person anyway - new partnerships often dont survive the growing pains, and sleeping partners tend to wake up quickly if they dont get the return they were expecting.

 

[Ray Stafford]

Very sound advice from Ray maybe he did not spell it out but suppliers will not always allow credit accounts to small and new ltd companies cause when they go tots up ray and co cannot get the dosh back but with sole traders etc they can take your truck wife etc CHK

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

 

[Killy Bing]

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

fully agree.

But out of interest, as we move from sole trader to ltd do we have to notify you?
also would our credit get reduced ?

 

[Sag]

Its more than just that CHK, although what you say is true.

The best person to judge the level of risk in a business is the owner. If the owner is using their time and money to create a limited company to protect themselves from the risk in their own business, what message does that send to potential creditors?

It's good business sense to protect yourself. It doesn't mean you are a conman for running an ltd (although there are far too many of them out there).

That's like saying having PL insurance means you know you're gonna screw up. That's not the case, you just value the security afforded to you by paying the premium.

 

[Killy Bing]

It's good business sense to protect yourself. It doesn't mean you are a conman for running an ltd (although there are far too many of them out there).

That's like saying having PL insurance means you know you're gonna screw up. That's not the case, you just value the security afforded to you by paying the premium.

The flipside is why does a new business have to be limited when they don't have the work to threaten their personal assets?

 

[Ray Stafford]

fully agree.

But out of interest, as we move from sole trader to ltd do we have to notify you?
also would our credit get reduced ?

You have to do more than notify us. The term "going limited" is misleading. You aren't changing at all.

When you start a limited company, it is a new legal entity. If it wants credit, it must apply for it in its own name.

If you are prepared to sign a directors guarantee, (which is incorporated into our account application form) then the limited company account is likely to "inherit" your credit status.

If you aren't prepared to sign such a guarantee, then your personal credit record is of no help, and we probably won't extend any credit at all to a new company until it has a few years trading history, and preferably some value in the balance sheet.

 

[Masood]

The flipside is why does a new business have to be limited when they don't have the work to threaten their personal assets?

I went Ltd from day 1. Nothing to do with protecting assets, just the way I wanted to structure the company. I had (still have) a vision and strategy, and a Ltd. company fit that better than sole trader.

I've had no trouble opening trade accounts but that may be because I didn't open accounts until I'd been trading for a while, always paid my bills, and showed through my purchasing history that I have a viable business.

 

[Ray Stafford]

It's good business sense to protect yourself. It doesn't mean you are a conman for running an ltd (although there are far too many of them out there).

That's like saying having PL insurance means you know you're gonna screw up. That's not the case, you just value the security afforded to you by paying the premium.

No, with respect, it isn't quite the same, and con-men aren't the issue. (Their MO is usually different - cloning was all the rage last year). The fact is that choosing a limited company as your mechanism sends a signal to lenders that you might be concerned about risk.

Any business which gives credit is effectively a lender, just the same as a bank. We make credit decisions based on imperfect information. It doesn't matter what YOUR reasons for starting a limited company are, you are putting yourself in a higher risk group.

Its like buying a Porsche 911. YOU may know that you will only drive it sensibly, but your insurer will put you in a higher risk category regardless.

 

[Killy Bing]

I went Ltd from day 1. Nothing to do with protecting assets, just the way I wanted to structure the company. I had (still have) a vision and strategy, and a Ltd. company fit that better than sole trader.

I've had no trouble opening trade accounts but that may be because I didn't open accounts until I'd been trading for a while, always paid my bills, and showed through my purchasing history that I have a viable business.

Ahh see you weren't a new company applying for credit then!
This reminds me.

 

[lame plumber]

As Ray points out so well, some people running ltd companies for the wrong reasons, which has lead me to refuse work from certain builders wanting me to sub for them, and I have been proved right in my thoughts in the past to follow this line.

 

[Ray Stafford]

There is another side to this, which is the nature of your purchases.

Merchants make different margins on different types of product. For us, the level of margin is roughly the same as the banks interest rate.

Since heating products, and particularly boilers, have very low margins, our appetite for unsecured lending to a limited company doing lots of boilers is pretty low. Spend more on higher margin product lines, and our appetite for risk may be higher, as our rewards are higher.

Don't forget that all the bad debts that a merchant takes are paid for by the good customer who do pay.

 

[Sag]

Yea Ray, two different views to risk. Your risk averse to new ltd's and i'm risk averse to my personal lifestyle being ruined by a business. Neither is wrong in their approach and we may never do business due to this, but I stand by limiting your exposure is good business sense. You do it by selective credit accounts and I do it by being an ltd.

What if some major jobs I'm doing Don't get paid because the customer goes bust. As an ltd I can save my family being effected by this. As a sole trader I'd be in the crap!

 

[lame plumber]

good business is picking your work to lower the risk, and your better refusing some jobs than running the risk of not being paid. Being limited and taking higher risks isnt good business sense at the end of a day, thats the reason this country is in the doldrums now, down to poor financial controls and too much risk, which from your previous life you would realise.

 

[Sag]

My previous life? My previous job?

You speak as if you know something/anything about me, you don't.

I didn't say go ltd to take bigger risks. I said ltd protects you.

I tell you what, don't have any PL insurance and just 'be careful' and select your jobs wisely and see how far you get.

 

[Killy Bing]

Ahhhh two schools of thought.
neather are right and neather are wrong
but rays only going to easily give credit to one of them......

 

[lame plumber]

a long way to date as I always found the advice received from financial advisers and finance companies to be detrimental to my pocket, so I choose not to use them and prefer not to waste my earnings on PL insurance and the like.

I plan to make profit not to fend off loss

 

[Sag]

So you think that's a clever move?

What happens if you get a lucrative job for a very expensive house?

Do you turn it down due to the risk of causing more damage than you can afford to repair or do you take it on because 'your careful enough' that you don't need PL?

Do you have home insurance? Or is that a waste of money too because you're too careful to have a flood or storm ruin your property?

 

[Jimbob]

Interesting subject.

Never considered going Ltd myself as I'm not that ambitious myself, and don't take on anything risky, ie, possibility of not being paid.

Iv been trading for 6 years and just getting to the point of becoming VAT registered, which iv avoided for as long as possible. I can't see how a start up would need to jump straight into LTD or even VAT. Best to build up at a sensible pace

 

[Jimbob]

a long way to date as I always found the advice received from financial advisers and finance companies to be detrimental to my pocket, so I choose not to use them and prefer not to waste my earnings on PL insurance and the like.

I plan to make profit not to fend off loss

Really LP? I though GSR required PL

 

[lame plumber]

my mistake, was thinking pl stood for some insurance product to stop you losing income or whatever, but if your referring to public liability we seemed to have moved 15 paces left. Of course I have pl insurance as you mention but this is nothing to do with ltd companies and the earlier arguments put forward. Not sure. what line you argument is trying to achieve now

 

[Sag]

Ahhhh two schools of thought.
neather are right and neather are wrong
but rays only going to easily give credit to one of them......

Absolutely, and he's entirely entitled to do that. He may miss out on a lot of business, he may save himself a lot of cash & stress. But each to their own when deciding who to give credit to. Too many people think it's their right to have credit and moan that the banks aren't lending etc.

I don't need credit, it just eases cash flow. Too many companies rely on trade accounts and overdrafts or worse factoring to survive, all are a bad idea. They should look to draw less out of the company and pay off these debts until they can operate in a cash positive way.

The main reason for our trade account is ease of accounting. Instead of 100+ receipts a month to go through, I have one statement. I can also add additional contracts to spend on our account making supplying materials easier for our subbies and helps their cash flow. Those subbies that aren't VAT registered use our account and we benefit from being able to reclaim VAT that we otherwise wouldn't if they worked on a supply & fit basis.

And with average job being about £3.5k there is a lot of transactions and VAT to deal with.

 

[Ray Stafford]

, thats the reason this country is in the doldrums now, down to poor financial controls and too much risk

At the risk of sounding picky, the cause of the recent financial crisis was not "too much risk". It was more that risk was mislabelled by the rating agencies, misunderstood by people who ought to have known better, and levels of risk were accepted by organisations whose business model wouldn't stand it.

There is nothing wrong with high levels of risk, so long as they are priced correctly and undertaken by organisations who understand them correctly.

For a very readable analysis of the banking crisis, try The Big Short by Michael Lewis.

 

[Killy Bing]

........
simple sag, staged payments and/or materials costs up front.

In reality, unless you start doing commercial installs or estates of new builds
the only way you will have your personal assets threatened is if you blow a house up or kill a customer.
due to being gas safe, being limited wont save you from either as you're a competent person.

food for thought.

 

[Sag]

my mistake, was thinking pl stood for some insurance product to stop you losing income or whatever, but if your referring to public liability we seemed to have moved 15 paces left. Of course I have pl insurance as you mention but this is nothing to do with ltd companies and the earlier arguments put forward. Not sure. what line you argument is trying to achieve now

No, it's to do with risk and liability. But obviously wires have been crossed. But if GSR didn't require PL, would you have it?

If so why? If not, why not?

 

[Sag]

Off topic but regarding VAT. If you do bathrooms for the disabled or elderly, you can charge the job as ZERO RATED or reduced VAT at 5%. But you're able to claim back (or at least offset) the entire 20% for any labour and materials you paid out. Just another example of why being VAT registered can be a good thing, regardless of if you hit the threshold or not.

 

[lame plumber]

taking out public liability insurance has nothing to do with being with gsr as far as Im concerned, it is just to protect those I work for from me accidently wrecking their lives and getting some compensation. Nothing to do with ltd companies as this thread started on.

 

[Sag]

taking out public liability insurance has nothing to do with being with gsr as far as Im concerned, it is just to protect those I work for from me accidently wrecking their lives and getting some compensation. Nothing to do with ltd companies as this thread started on.

It protects YOU from being personally sued for the damage. That's why you take out the policy not the householder.

So, if it wasn't required, would you have it or not?

 

[lame plumber]

Off topic but regarding VAT. If you do bathrooms for the disabled or elderly, you can charge the job as ZERO RATED or reduced VAT at 5%. But you're able to claim back (or at least offset) the entire 20% for any labour and materials you paid out. Just another example of why being VAT registered can be a good thing, regardless of if you hit the threshold or not.

not quite true, you dont need to be vat registered for the customer to claim 0 vat, they can do it for themselves by buying direct fm the merchant, then you just charge for the fit and add some on for the loss of supplying the suite, being your not vat registered they dont cop any tax and alls well.

 

[Sag]

not quite true, you dont need to be vat registered for the customer to claim 0 vat, they can do it for themselves by buying direct fm the merchant, then you just charge for the fit and add some on for the loss of supplying the suite, being your not vat registered they dont cop any tax and alls well.

And you lose the opportunity to make a margin by supplying the goods at the same price they could have got them for, but by buying them at trade price......

 

[lame plumber]

It protects YOU from being personally sued for the damage. That's why you take out the policy not the householder.

So, if it wasn't required, would you have it or not?

now who is being muppet like, Ive already answered that one

 

[lame plumber]

And you lose the opportunity to make a margin by supplying the goods at the same price they could have got them for, but by buying them at trade price......

read the post muppet man

 

[Sag]

now who is being muppet like, Ive already answered that one

You said of course you have it, but not answered if you would have it if you didn't need it.

And as I've said, it protects you, so despite all your seeming negative vewis on being risk averse (such as having an ltd to protect personal assets) you do in fact have (and presumably would have regardless of being grs) insurance - protecting you! I.e. covering yourself from a worst case scenario, not because your out to cause damage.

If you stopped trying to argue for the sake of it, you might see what im saying.

 

[lame plumber]

I'm very risk adverse, dont like heights, dont like finance sales folk, hate builders and bankers alike, but love working for myself (which is a dangerous as it gets), so never buy stuff I cant afford, always pay my bills and plan my cash flow carefully. I also hate paperwork, so choose not to go ltd or vat registered and find that still leaves me enough money to live a comfortable life. I do though own my own house and other properties outright which means I dont have to stress so much as the likes of Sag prehaps and most of all I like a little banter. Prehps sag beginning to realise that now🙂

 

[Sag]

Who says I stress? I'm director of an Ltd which I run properly, it's VAT registered and insured. My account deals with anything I can't/don't want to deal with.

I also love working for myself (let's not debate the self employed v employed due to 'working' for the ltd), pick and choose my jobs. Life is good.

 

[MOSSEP]

Of all the business decisions I have made becoming VAT registered is probably the best. I believe it generates us a lot more commercial work, and it doesn't scare off all of the domestic clients like some would think it does. I think some folk misunderstand, but its only the labour we add 20% compared to non VAT companies, they still have to charge the VAT on materials.

As long as you keep your book keeping in good order it's not hard to do returns, and I love the fact that everything my business needs is now 20% cheaper than when we were not VAT registered.

 

[SafeGasInstall]

And you lose the opportunity to make a margin by supplying the goods at the same price they could have got them for, but by buying them at trade price......

Trade price ? ??? Are you kidding me

 

[SafeGasInstall]

What will happen if some can not longer make payments on there credit card , bank loan , motor finance , suppliers bills ?
I did know some one who wiped out £120k and them changed his job , and he told me after 6 years he will be cleared of his records . Is that how it works ?

 

[Sag]

Trade price ? ??? Are you kidding me

No, we did one recently and there was a few hundred off for trade. Why is that so hard to believe?

Have you seen the price of these mobility bathrooms?

 

[Sag]

What will happen if some can not longer make payments on there credit card , bank loan , motor finance , suppliers bills ?
I did know some one who wiped out £120k and them changed his job , and he told me after 6 years he will be cleared of his records . Is that how it works ?

Defaults stay on your credit file for six years. Bankruptcy used to be the same but they changed it quite a few years ago. I think it was branded the enterprise act. It was dropped to one year and their main reason for doing so was to encourage people to go into business for themselves without the worry of 6 years of poor credit rating if it failed. However, the 1 year timescale applies too most bankruptcies, not just failed business owners.

 

[Nostrum]

I'm with sag on this one.

Ray has a completely different perspective on this matter which you have to appreciate. As a lender he wants to to know he will get back what he has lent. It's pretty common knowledge that if your company (ltd so an entity in itself) runs into financial difficulty, merchants are normally the last on the list to get paid, which is very often not at all)

The simple solution is to require a personal guarantee so that the director is personally liable for debt, much the same as the bank will require if you take out a loan.

In reality, this shouldn't be an issue so long as you run your company responsibly in the same way you would a sole trader.

Williams and Co are a ltd company, why? Because running a business on this scale does carry risk. Lame, if you run your business with zero risk then very well. I know of 2 business owners (sole traders) who have lost their house during the recession due to non payments. The contracts were large and non payment meant bankruptcy. Neither were stupid either, the recession bite hard as a long spell of growth suddenly snapped into downturn. These businesses thought they were doing well and expanding steadily as most business owners intend on doing

It depends where you see your business going, as Ray has said you can't just go limited, you start from scratch as the company becomes an entity in itself with no credit history no claims bonuses etc. so if you are in full swing this can be very disruptive to business decisions, lower credit, higher costs.

So as a sole trader I would say you are limiting your business prospects and decisions if you want to ensure you don't end up potentially losing your personal possessions as a consequence of non payment, larger the job, greater risk.

If you just want to earn a wage and have no intention of growing considerably then a sole trader is fine, if you want to take on jobs that inherently carry more risk (greater valve, larger scale, or multiple jobs at once with employees etc) then you risk everything you own doing so as a sole trader.

Business and risk go hand in hand, it's about limiting the damage as far as reasonably practical, this goes for us and lenders (merchants)

is Ray being irresponsible buying 50 magnacleanse units that he has no guarantee of selling, or has he taken a calculated risk to secure a better profit margin?

 

[Sag]

I know of 2 business owners (sole traders) who have lost their house during the recession due to non payments. The contracts were large and non payment meant bankruptcy.

Business and risk go hand in hand, it's about limiting the damage as far as reasonably practical, this goes for us and lenders (merchants)

Which is why I set up as an ltd. You pay insurance to avoid/limit risk/liability.

I pay more in accounting and a little more time doing administration for exactly the same reason.

It's all too easy to say it cost too much or it's too much hassle, but it's a known cost vs the unknown cost of the failure of a business and the debts it would leave to be paid back personally, or bankruptcy.

 

[Nostrum]

And I also agree with Sag on the credit accounts. I have enough money in my bank account to cover my merchant credit limit but I choose to use the account to aid cash flow and simplify the process. If you are borrowing thousands of pounds a month but have only a few hundred quid in your bank then you need to look at why. Cash flow is the key to any business, you can't run on empty all the time and rely on credit, this itself is more irresponsible then being a limited company. Increase profits or decrease your wage to allow the business to grow.

 

[lame plumber]

Of all the business decisions I have made becoming VAT registered is probably the best. I believe it generates us a lot more commercial work, and it doesn't scare off all of the domestic clients like some would think it does. I think some folk misunderstand, but its only the labour we add 20% compared to non VAT companies, they still have to charge the VAT on materials.

As long as you keep your book keeping in good order it's not hard to do returns, and I love the fact that everything my business needs is now 20% cheaper than when we were not VAT registered.

not quite true.if you add a mark up on your materials, that cops 20% vat as well so its labour and materials mark up. if your mainly domestic it does effect your market somewhat as a job with £200 labour, materials inc vat of £120 for a non vat co would total £340 with a 20% materials mark up. If you are vat reg that would now be £384 some £44 more, which would hurt most folks down here. So the choice is do you put the whole 20% on or absorb some. Ok materials and tools come in 20% less so that can help your pricing, but the aim is to be earning not saving on materials and vat is a tax on earnings if your a business so that expect your earnings to be more than your costs such that the balance is their way. you then pay income tax on your net profit, so non vat claim more against tax than vat reg folks which evens it out a bit.

I would like to see the figures for a business with vat limit approaching to see how the overall difference in claiming vat, against income tax and a change in trading takes effect on both sides, then make an informed decision as whether or not to go vat registered. to date the accountants have always told me to take time off rather than hit the limit as he works the works for both sides with tradesmen around here, the ones who have transferred to being registered, seem to be the ones who have gone under in recent years, now that could be down to various factors but its rather sobering to see.

 

[MOSSEP]

Any business we may unknowingly lose by being VAT registered has been more than offset by the increase in commercial work we have secured since VAT registration. Our turnover increase since VAT registration has been good, although it was on an upward trend anyway.

We didn't gain our commercial clients due to being VAT registered, it was all from recommendation, but we certainly would not have kept them if it were not the case. I can see the view of trying not to go over the limit, but I would not restrict a companies progression to do it.

 

[Centralheatking]

NICE ONE RAY its good to see u being open and honest - at the end of day we are all in this together CHK

There is another side to this, which is the nature of your purchases.

Merchants make different margins on different types of product. For us, the level of margin is roughly the same as the banks interest rate.

Since heating products, and particularly boilers, have very low margins, our appetite for unsecured lending to a limited company doing lots of boilers is pretty low. Spend more on higher margin product lines, and our appetite for risk may be higher, as our rewards are higher.

Don't forget that all the bad debts that a merchant takes are paid for by the good customer who do pay.

 

[Centralheatking]

Lame plumb is right - this is just what have done thus

All my business is vat /declared etc no problem because when we decide to
sell the business the potential buyer can see the truth . we have been down this road
a few times times. Build up a business keep a database I then sell for 50% equity and and
keep a share of the profit for 2 year.

My Turkish best mate George does this with chip shops and guess who does the
gas water buiklding etc CHK

 

[Centralheatking]

George is a good player and makes his curry sauce in a electric dedicated cement mixer
2x per week and each time its worth £1000 when put into little cups

he heats it up with a propane roof burner set made by guess who CHK

 

[Kev the gas]

George is a good player and makes his curry sauce in a electric dedicated cement mixer
2x per week and each time its worth £1000 when put into little cups

he heats it up with a propane roof burner set made by guess who CHK

Thanks for that !

I "USED" to be quite partial to a bit of curry sauce with me chips

 

[SafeGasInstall]

Lame plumb is right - this is just what have done thus

All my business is vat /declared etc no problem because when we decide to
sell the business the potential buyer can see the truth . we have been down this road
a few times times. Build up a business keep a database I then sell for 50% equity and and
keep a share of the profit for 2 year.

My Turkish best mate George does this with chip shops and guess who does the
gas water buiklding etc CHK

No way a Turkish man is caled with Christian name !!!

 

[WaterTight]

George is a good player and makes his curry sauce in a electric dedicated cement mixer
2x per week and each time its worth £1000 when put into little cups

he heats it up with a propane roof burner set made by guess who CHK

well at least as a freebie i imagine you get all the cement-mixed roof-burned diarrohea coloured gloop you can keep down

 

[Kev the gas]

BBC - Religions - Christianity: Saint George

there you go Stan.

 

[SafeGasInstall]

We also have st. George (Bulgaria)
and we selebrare this on the 6th of May (also national army day)

but not Muslim from Turkey is called George !!!
I grew up in Bulgaria and we had lots of Turkish people in my country and no Turkish man will call his son George !

 

[SafeGasInstall]

BBC - Religions - Christianity: Saint George

there you go Stan.

Here is something for you too Kev 🙂
Madara Rider - Wikipedia, the free encyclopedia

 

[village idiot]

After reading all of this stuff, I have decided to go on-line and register my company name with Companies House as a Ltd company. (Only trouble is, I have made one blunder: I have registered all the TEN shares as ''fully paid up''. That was not a smart move. I should have taken up SIX shares and leave FOUR as unpaid. That way, I can in future hand a share each to missus and kids, but remain as the majority holder so my decisions will be final. Only just submitted it a few minutes ago, then realised I had made a poo-poo?)

Any way, they say it takes 24 hours for it to be accepted or declined. I hope it is declined now? The only reason I have registered the company is so that someone else doesn't take up the name. It will stay Dormant while I continue to trade as a Self Employed fool.

And as a matter of fact, the benefits of being VAT registered (even if your transactions do not hit the threshold) far outweigh the reasons for not being registered. But I choose not to be VAT registered.
Also, the benefits of trading as a Ltd company far outweigh the reasons for not trading as one. Again, I prefer to stay as Self Employed for now. Have been for the past EIGHT years.

Every Accountant I know or do jobs for starts screaming at me and my stupidity for not trading as a Ltd company. But I know what they want: The opportunity to provide me with tax savings advice. REALLY??? As a Self Employed bloke, I do my own tax returns, so it costs me nothing. And even when I require a major loan and the banks insists on Audited Accounts, I personally prepare the accounts and hand them to an accountant who then ''prepare'' it under their company logo, and present it to me after charging me an unnecessary ''hefty fee''? I mean, to charge someone £900 for an accounts they have prepared themselves and which takes you 15 minutes to transfer and sign and put your company stamp on is ridiculous. But that is the world we live in.

 

[Admin]

Don't mind me while I bump some threads in the plumbing forum category. This thread might not be a current topic, if it isn't, just let it drop off the list.

If you DO want to reply to it, go ahead, that's fine. Your post might add some value to the thread and help newer members in the future.