Recent changes to tax have meant that the attraction of transferring your business to and running your business through a limited company is much diminished and generally people have been put off the process. For many this is correct although I have found that few clients want to take the step of dis-incorporating where they have previously done so.
There are circumstances however where it is still worth considering incorporation. For example:
- where the goodwill valuation is relatively small and the capital gains tax, at 20% now, after the personal allowance is manageable
- you have a potential investor who does not want to form a partnership and indeed is interested in SEIS or EIS tax relief
- you claim incorporation relief and defer any gain into the shares of the company without losing the ability to ultimately claim Entrepreneurs relief when you sell the shares in anticipation of a sale
The use of a company generally is not that efficient where you intend to draw out all of the profits as salary / dividend but it is a good vehicle in which to retain profits at low rates of tax and to invest into the business. Also it allows you to control the level of income you receive ensuring that you do not fall foul of nasty marginal rate bands.
For a more detailed article by tax lecturer Rebecca Bennyworth read here.
If you would like to talk to us about incorporating your business get in touch.