Are you starting out in the world of fashion and unsure whether to incorporate your business or continue operating as a sole trader? Although it’s not a legal requirement to incorporate your fashion business, there are a number of benefits in doing so. We recommend incorporating as a Limited Company. Here’s why….
- Limited Liability – This essentially means that if your company runs out of finance the individuals behind it will not be held personally liable for the debts of the business. So, in the unlikely event that your business fails, your personal money, home, and shoes will be kept safe from anyone the company owes money to.
- Tax Efficiency – In most cases it is more tax efficient to incorporate as a Limited Liability Company.The dividends of a limited company are not subject to national insurance and are at a lower rate of tax than self-employment income.
- Status – Operating through a Limited Liability Company appears more professional. Consumers, suppliers and further down the line, investors, will often be more willing to do business with a company. Having ‘Limited’ after the name gives you a certain gravitas. It says you mean business!
Like everything, there are unfortunately cons as well as pros to incorporation.
- Paperwork – Sadly, running a business does involve paperwork from the get go. In addition to the initial paperwork, you need to submit annual returns, tax returns, and personal assessments. It’s not as daunting as it sounds though! Wigsandgowns can provide information on what’s sent to whom and when, and how to complete those pesky forms. We will be providing helpful tips to limit the time you spend doing boring admin, leaving you more time to work on what your best at!
- Confusing tax requirements. Nothing strikes fear in the heart like dealing with the tax authorities. But, like paperwork, dealing with HMRC is a necessary evil when you’re running your own business. We know, their website is confusing, it’s full of acronyms and terrifying sounding penalty notices. It’s not as scary as it looks though. There are some good and importantly reasonably priced accountants out here that work with small businesses and will take all the stress and worry out of the word tax!
- Costs – You will need to pay some initial set up costs (no more than £20-£80) and unless you’re a tax whiz (in which case you probably wouldn’t be reading this) an accountant to deal with legal tax requirements. However, the savings to be made from the tax advantages will far out weigh these costs!
So what do you think? Will you be making the leap and incorporating your fashion business this year?