I have had some very interesting discussions over the years about our trading status. We find that when we are completing forms, there is never an appropriate box to tick. The choice is limited company or partnership, and we are neither. We sort of fall down the gap in between. We are also definitely not an LLP or a Limited Partnership. So what are we.
We are a company. We are registered at Companies House as a company. You can check it out if you want – SC259258. Helen and I are directors and shareholders. But, even though we incorporated back in 2003, we have never filed any accounts, and that’s all quite legal. Have you ever come across a company that has never filed accounts at Companies House. We have because we do it for some of our clients who are also companies.
We are an unlimited company!
So, first and foremost we are a company, just like many of you. But there are a variety of different company forms. What I often find is that the word “limited” is inseparable from the word “company” in the minds of so many people. The two big differences are that we do not have limited liability, but we do not need to file accounts at Companies House. We still have a legal obligation to prepare statutory accounts and we do submit our accounts along with a corporation tax return to HMRC.
So, there are pros and Cons, and unlimited status is certainly not for everyone. In my mind there are three main reasons to operate through a company. There may be others.
First you may want to separate the business from yourself and that can be for various reasons such as succession planning, ease of sale, to build d particular brand, etc. Secondly it might be to protect your personal assets. Business is a world of ups and downs and if the downs get too bad, you don’t want to lose your home. Lastly, there is the tax saving that you might achieve, although this is not anywhere near as good at it used to be.
On the other side there is the fact that you must file accounts at Companies House. Companies House also imposes strict deadlines on you and, at the very least, you will be publishing your balance sheet. Now, give me two or three balance sheets and I will tell you the scale of profits you have been making. I will even take a stab at your turnover. You can tell a lot from a balance sheet. On top of that, there is presently some discussion going on about whether you will be required to file more information in the future.
But this only applies to limited companies. It does not apply to us. You will never see our accounts.
In the early days we certainly benefitted from substantial tax savings by operating through a company, but the dogs changed the rules and so those sorts of savings are no longer available. If you are a higher rate taxpayer and don’t need to take all of your profits out of the company, there are still tax savings to be had but they will rarely be the sole driver for wanting to incorporate.
So, should you incorporate? Maybe. But it will depend on a range of factors which I cannot fit into this brief article. Should you be limited or unlimited? That will be your personal preference. Anyway these sort of decisions must take into account your own personal and business circumstances which might be very different to anyone else.
If you want to carry on this discussion but you are not sure where to find us, go to our website where you will also find some more interesting reading please chick here
Alan E Long
The Long Partnership