Sole trader or LTD?

12 replies [Last post]
Nintembo
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Joined: Jun 22 2004

Hi,

I am currently in negotiations with several distributors to sell my DVD product which I have been in production of for the last year.

I was wondering, when it comes to signing on the dotted line and going through with things, am I going to need to do so behind a private limited company (LTD) or can I just do it all through my name?

Thanks

oddball
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Joined: Jan 17 2004

Hi there,

Generally speaking, I would suggest ltd, mainly as this offers some form of protection and is recognised as a legal entity. Its much more responsibility, but in my opinion worth the hassle.

Find yourself a good account, mines worth his weight in gold.

As a sole trader should anything, god forbid, go wrong then you are liable for the lot, as in they can have, quite literally the roof over your head.

Have a look at the info at companies house and check out business link, I'm sure that there are other people in this forum who can provide far more relevant advice and good luck!

May the force be with you!

Oddball xx

PaulD
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Joined: Aug 31 2002

Hi
As long as your new Ltd company doesn't need to borrow money, as the banks then will give you a personal Guarantee to sign, so should your Ltd company get into difficulties they can have, quite literally the roof over your head.

ClaireTall
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Joined: Jan 28 2004

I trade as ltd co because it gives me the choice of how much money to take from the business during a good year and not pay 40% tax. It also gives a more professional image and many big companies will not deal with you without being registered at Companies House.

Separating the business from your personal dealings, I find gives a sense of discipline as well because you cannot just spend the money without consideration and a bit of accountants advice.

Chris of Hallmark can give good advice here.

Claire, Chief Executive, Managing Director, tea girl and toilet cleaner, Excelsior Films Ltd.

Studio with green screen for hire near Gatwick Airport.
Kit hire facilities on site.
excelsiorstudios.co.uk

Nintembo
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Joined: Jun 22 2004

The production is complete - I have the masters in my possesion, so borrowing money would not be an issue, and in theory it should be nothing but income from here as I am looking to sell the rights to a distributor and pick up royalties per unit sale.

The only reason I'd need an LTD is to complete a deal with a distributor.

Out of interest, the sales I'd pick up, would these go directly into whatever account details I provide? And would I have to declare TAX on these? Also, how would the TAX be affected if I were to operate from an LTD in contrast to a sole trader?

DV Ed
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Joined: Jun 10 2002

You really need to speak to an accountant. They will usually give you an hour free.

LTD doesn't offer as many tax benefits to the directors as it used to. But I am still LTD. Don't forget also as a company director you should also do a self assessment tax return. Many don't bother, and can find they become unstuck.

nash
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Joined: Nov 20 2003

Nin,
You don't really give much info about the expectations you have for the production in terms of sales? If you are expecting high volume and hence high turnover then offsetting this against the spend and paying corp tax on the difference is essential. If it is the reverse and you aren't making big profits then careful consideration is the route.

If you are intending to increase your client base and do lots of business across numerous clients then Claire's point about appearence is valid. If you are just distributing your one or two production(s) then may not be worth the extra admin??

Discuss.................Neil

Neil Ashcroft
Fastroc is Media in Motion
http://www.fastroc.co.uk
[EMAIL=info@fastroc.co.uk]info@fastroc.co.uk[/EMAIL]

foxvideo
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Joined: Sep 9 1999

I hope that once this production is out and generally available you'll tell us - after all the help and advice you've had on this project from board members here over the past 12 months or so, it would be good to see what it was all about ;)

Dave Farrants Fox Video Editing

Nintembo
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Joined: Jun 22 2004
nash wrote:
Nin,
If you are expecting high volume and hence high turnover then offsetting this against the spend and paying corp tax on the difference is essential. If it is the reverse and you aren't making big profits then careful consideration is the route.

Hi Neil, could elaborate on this in leymans please, it sounds rather interesting. I aim to sell 20,000 units, with distribution in four countries.

HallmarkProductions
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Joined: Aug 29 1999

Sole trader or Ltd is a very difficult one to answer. If you have assets that you wish to protect, then Ltd is often better - but, not always so, as Directors are usually held accountable by guarantees in the case of borrowings, or perhaps with leasing arrangements. Taxation is also a big factor, and things will vary according to personal circumstance. Take the company car for example - a director would be taxed on the benefit, whereas a sole trader would offset the cost of business usage against tax. Similarly, there is "use of home as office", personal tax allowances, and other tax benefits to remaining self-employed. Admin for a Ltd company can also be a burden and your accounts are a matter of public record. That said, Clare's point about perception is a good one. We have the Limited company and the sole trader, so, have both worlds! A limited company also means that your trading name is protected - which may be relevant too.

Chris
Time for a new signature now...

Nintembo
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Joined: Jun 22 2004

OK guys, going back to this one. I have a distributor lined up.

Should I set up an LTD for the protection. Keeping in mind:

- I wont need a business account. Everything is paid for. I assume. or will I need a business account for all the earnings of the DVD to go to?

HallmarkProductions
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Joined: Aug 29 1999

The advice that you received before still applies. It is best that you seek an accountant to chat it through. Ltd or not, you should still have a separate bank account to make accounting for the flow of money that much more simple. Technically, if you do not have a business account you are defrauding the banks (some might say that tthey deserve it though!).

Chris
Time for a new signature now...

Alan Roberts
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Joined: May 3 1999

Use an accountant. It'' be the single best investment you ever make. And I seem to recall telling you this many times before. It's still the best advice you'll get here.

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