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Running A Small Incorporated Business In The UK

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Running A Small Incorporated Business In The UK By Naz Daud

Running a small incorporated business within the parameters of the law is much more complex than many people imagine. There are thousands of small companies operating in the UK, many of which have just one or two members. However, of those companies there is a substantial minority operating their business ignorant to what is legally required of them, that could ultimately face litigation were they ever to sell their small business to savvy, well advised investors. As a result of recent legislation, the limited company no longer requires a company secretary and there is only a requirement for one director in private limited companies. Thus it’s now possible to run a private limited company as a one-man band, without the need for involving others in its administration and management. However, many small businessmen fall into the trap of believing that means they can treat the business as an extension of themselves, or as a piggy bank from which they can take money as and when they please. Unfortunately as many find out when they later try to sell their business, or bring on an investor, this is not the case. The limited company is a separate legal person, and taking money that has not been authorised from the company, i.e. an unlawful distribution could land you in serious trouble with the courts. The company should be run properly and managed well. Any payments to you should be in the form of a salary, bonus or dividend payment and should be recorded in writing for the sake of record keeping. On the subject of keeping records within your small business, a limited company is legally required to maintain day to day financial records and to retain these records for inspection for up to 3 years. If you don’t have these records, both the company and the directors have committed a criminal offence and can be subject to criminal penalties as a result. If you’re running a small business without keeping adequate records, it may be time to start considering your options, and it’s better to start keeping those records right away to ensure you do not fall further behind. There are naturally tax implications of running a small business as an incorporated entity. For example, if you were to run a business making £10,000 in profit, you would be subject to corporation tax of 20% on that £10,000 and income tax on any money paid out as salary (assume £20,000 which would also be taxable at 20% and deductible from the profit figure, plus National Insurance
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contributions). Thus the total tax paid in this instance would be £6,000 plus additional National Insurance contributions at both employee and employer level. However, were the money to be paid out in dividends from a £30,000 profit, National Insurance would no longer play a role, and the dividend payments would attract no additional tax. Finally, running a small business requires the director to treat himself as an agent of the company, and to act in the best interests of the company rather than in his own interests as the major shareholder. Even where a director also owns 100% of the shares, it is his legal duty to act in the interest of the company and subsequent legal action from new shareholders tackling retrospective actions could see him liable to compensate the company in respect of any losses it sustained from him acting out with the scope of his duty. Naz Daud - CityLocal Business & Franchise Opportunities http://www.citylocal.co.uk/ http://www.citylocal.co.uk/frontend/franchiseinfo.php?cityid=79 http://www.citylocal.ie/ http://www.citylocal.co.uk/cities/Dundee/news/article/921/ http://www.citylocal.co.uk/cities/Dundee/news/article/922/

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Incorporation Services Help Business Owners Get Serious in a Serious Economy By Melissa Gordon

If you’re a business owner with a sole proprietorship, you might be wondering whether it’s time to incorporate your business. Lots of sole proprietors crave adding the coveted title of ‘corporation’ to their business, but few understand the advantages and protection they can enjoy from incorporating their business. When you form a legal entity for your business, sometimes in the form of a corporation, you’re taking your business to the next level. Not only are you showing the world that you’re a serious business person, you’re showing them that you are here to stay. And stability in a challenging economy is just what everyone is looking for. There are several different legal entity options and it’s a good idea to do some research, or even consult a professional, to determine which one is right for your business. In the case of a corporation, your business becomes a federally recognized corporation firm. You can have shareholders and for many business owners, this means big time business. For many business owners, the tax benefits associated with incorporating your business are the biggest attraction. When you remain a sole proprietor, you’re subject to what’s referred to as ‘double taxation.’ Most people aren’t too jazzed about being taxed once, much less twice. There’s actually a special tax just for business owners called Self Employment tax and sole proprietors are required to pay Federal tax rate as well as the Self Employment tax. An incorporated business is eligible for certain tax breaks and advantages that are enough to make any business owner want to get up and dance. Limited liability is another great advantage to incorporating your business. Sole proprietors run the risk of losing everything should someone decide to sue their business. Sole proprietors’ personal assets are fair game in a legal battle regarding their business, and such an incident could leave the business owner with nothing. Corporations arm business owners with limited liability and they are only at risk to lose the amount of equity they invested in the corporation. In the event of a legal battle, the business owner’s personal assets are off limits as the corporation acts as a stand-alone entity. An incorporated business also gives you more credibility among clients, peers, and lenders. Banks and organizations are much more likely to back you in terms of funding or loans if you’re incorporated. And with banks tightening their belts, business owners need all the help they can get when it comes to capital, financing, and lending. Incorporating your business can give you that extra boost you’re looking for. So just how do you get your hands on all of these great advantages of a corporation? Incorporating your business is easier than you would think. Incorporating used to take months, even years. Now, with the help of incorporation services, your business can become a corporation faster and easier than ever. You can be on your way to running a serious corporation in this seriously tough economy before you know it. Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.

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Melissa Gordon is the publisher of http://www.LegalBuffet.com, a complete online resource that compares the legal services offered by various online companies. Find the best company for your incorporation needs at http://legalbuffet.com/incorporation-services/.

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