Tax planning and business structure
Tax planning and business structure
Business tax planning should be a key consideration for any business start up. Your choice of legal structure can have a significant impact on likely tax bills.
If you set up in business as a sole trader or in a traditional partnership, you will be self-employed — and therefore liable for income tax on your profits. So your tax planning should focus on income tax planning, along with other personal tax planning issues, such as minimising any eventual inheritance tax. You can find advice on inheritance tax planning.
By contrast, a limited company will require corporation tax planning as well as income tax planning. The effect in terms of overall tax (and National Insurance) liabilities depends on a range of factors, including the level of business profits and how much income you need to take from the business.
Of course, tax planning is not the only issue. You may want to take advice on other issues, such as the significance of limited liability protection if you form a company.