Limited company and sole trader?

[gordy71]

Hi guys, I have been self employed for 18 months now and am just about getting by. At first i was mostly subbing to people with the view to pick up my own work along the way. So i registered with elecsa and began to take on jobs. Before christmas the contracting work dried up and now i am sacrificing my wage to concentrate on pushing my own stuff. But tbh im finding im working longer hours, and the amount of paperwork is horrendous. I now have decided that there is really no money or security in doing domestic electrics. What i mean by this is that i am never booked up more than a couple of weeks in advance and due to the nature of the work (most jobs taking a day or less apart from the occasional rewire) im finding it hard to earn a decent wage let alone expand the business.

So recently myself and a friend who is a carpenter have been toying with the idea of starting a general building company as between us we have all trades covered and i reckon there is more money to be earned once you start subbing the work out. My question is, being a sole trader, can we form a partnership and keep our existing businesses running? My dad has advised that we should go limited and the tax and personal benefits seem to make this a wise decision. Has anybody been or is in this position. I would appreciate any help or advice, Thanks!

 

[NozSpark]

If you went LTD then you would become an employee and be salaried with directors dividends, this means that you'd be PAYE for the company, if you wanted to also be self employed then I don't think that would be a problem apart from complicating your tax return

 

[ProDave]

Self employed and booked up 2 weeks in advance is good in the present climate.

Don't knock it, at the moment I hardly know what, if anything I'm doing from one day to the next. Just two small jobs for me to do this week.

Now personally that suits me as I don't need to earn much due to other income, but if being a sparky is your only income then it's tough out there at the moment.

I would say get any form of work from anywhere you can. Flexibility is the key to making a success of self employment.

Paperwork is a PITA but unfortunately necessary as a sole trader, unless you employ someone to do it for you.

 

[Cirrus]

I went Ltd 2 years ago after a brief stint on my own. I brought in my best mate on a 50/50 share basis. It works really well and as said, we pay ourselves a monthly salary (below the annual tax free sum) and then the rest is dividends as and when we want. The big thing about being limited is that if things get very sticky - as they often can in the building trade then should you have to fold your liability is limited to the amount of your share capital which can be just

 

[Evans Electric]

I may be wrong here but I think you would be better off as a Sole Trader . Having two weeks work booked in in todays climate ,as Dave says, is good . There is little commercial and industrial work about at the moment.

I think joining forces with the Chippie is a good idea, and if one of you can do some plumbing as well what about kitchen fitting.

I've thought for ages that for the building type trades , multi-skilling is the way forward. The more the two of you can do between you the better.

But you must have trust betwwen you or it will all end in tears.

Just remain , both of you, Sole Traders, as far as I can see, thats what I've done with another spark for years .

And yes , proper self employment means longer hours and more paperwork , especially in this game, but the financial rewards are greater once we get out of the worst recession any of us have ever known.

 

[Cirrus]

I think it depends on your turnover and how much financial liability you may have for example, if buying thousands in materials each month and you end up going bump, as a sole trader you bear the brunt of it. As a Ltd, you don't. Ltd costs more in professional fees and accounts need certifying each year. I have a friend who just lost his house and cars as a sole trader. I also owned a business (not in construction) 12 years ago that went bump for 1/4 Million and I came out of it unscathed luckily - if I was a sole trader instead then I think I would have taken a shotgun down the bottom of the garden and said my goodbyes!

 

[Sidewinder]

I'm with Cirrus, Ltd every time for me especially when you look at the value of the kit I "play" with, that way as long as I pay my mortgage my house is safe!

 

[batty]

Is there really the work there for building firms I am not so sure there is. The main firm I sub contract to sends out hundreds of letters to people when they get planning and very little work comes from this. My accountant did talk a bit about limited a few years back but recently said the benefits are not there so much. You would really need to talk to an accountant to see what is actually involved and if the financial benefits are worthwhile.

 

[davetheglitz]

But you must have trust between you or it will all end in tears.

Trust is imperative. However trust is a continuous process and with backs against the wall you can be surprised!!! A co-operative sole trader agreement makes good sense.

 

[Apache]

Limited company is a 'safer' way to trade and can be more tax efficient. It all depends how much money you are likely to earn. I have a book somewhere that worked out the tax you'd pay and you had to be edging

 

[MKS]

I was limited for over a year with my brother as partner, suffice to say I am sole trader now with the words my missus ringing in my eyes ' You'll regret it ' When time got tough, lack of work, money etc, my so called brother would do his own foreigners whilst I picked up the tabs for our incoming bills etc!! Working with family is like working with animals in Hollywood, it's a match made in hell, that only brings heartache! That is all

 

[Stevie h]

Your better of sparking, heating, solar, renewable etc anything that is a bit specialised.... Not a lot of building work about and every man and his dog thinks they can build.

LTD is good if your ok to take a small wage most of the year and a dividend on a yearly basis... If not... Stay as a sole trader.

Ste

 

[Cirrus]

Your better of sparking, heating, solar, renewable etc anything that is a bit specialised.... Not a lot of building work about and every man and his dog thinks they can build. LTD is good if your ok to take a small wage most of the year and a dividend on a yearly basis... If not... Stay as a sole trader.

Ste

Dividend on a yearly basis? Why??? I take mine every month or so. Perfectly acceptable as long as your business is profitable as it is illegal to pay dividends if not in profit.

 

[Stevie h]

Accountant advised .... Maybe easier ( for accountant ( probably )) .. This is my brothers bussiness ... It's a partnership too.

I'll ask the question as he is always moaning about taking a low wage while waiting on the dividend.

 

[SPECIAL LOCATION]

From here....

What are limited company dividends?

Dividend TimingThere are no rules governing how frequently you can distribute dividends, although many larger companies do so on a quarterly basis. It may suit you to distribute dividends to coincide with you VAT quarter, (if you are registered) or you may prefer monthly dividends for cashflow reasons.

However, you can only distribute dividends if you have made allowances for your tax liabilities. You must never distribute funds if you have not allowed for tax.

 

[SLIPSHOD & SLAPDASH]

We are Ltd. Myself and my business partner are not PAYE & the company is not registered as that either . We have only ever have dividend payments once a month . It doesn't really make much difference on the tax you pay until your really pulling in a big profit. As other have mentioned its also a security blanket if the s**t hits the fan (and it wasn't entirely your fault) then your house, car etc cant be touched.

 

[SPECIAL LOCATION]

Anyone operating a significant amount of commercial / industrial work....

where outlay is greater and invoice payment is generally longer (months)

needs to serious consider protecting their home etc.. through a Ltd company...

But if predominately domestic work, generally this has a faster turnaround from invoice to paymet.....

outlay is less (materials for an average domestic rewire are probably somewhere

 

[gordy71]

Thanks for the comments everyone. I dont feel so bad about having the odd day wathching jeremy kyle and judge judy now! Initially we were going to just work weekends and let the money build up in the bank account till we could come to the point where we had enough for us both to give it a go full time. Theres alot to think about yet, it would be a bit of a juggling act to keep all my existing customers happy as well as arranging other building jobs. I agree there probably isnt a great deal of work out there for builders at the moment but i think you must have your fingers in a few pies to survive! I think the obvious route to go would be green. I have a friend who is an renewable energy expert, so i was thinking of offering energy consultancy services, sending him round to consult/sell the jobs and we could install the kit? Is the solar boat long gone or is there still money to be made?

 

[steptoe]

I have a friend who is an renewable energy expert

is he a professor or something?

without sounding too cynical, everybody knows a renewable energy expert, but most of the 'experts' know next to jack what they are talking about,

they may know all the theory, but they havent got a clue about the practicalities.

 

[gordy71]

Well considering he has studied it at university and Taylor Wimpey employ him to make sure they are meeting the requirements i would say hes fairly well qualified, but no he's not a professor!