Incorporation of Business

There is much debate presently as to merits of Incorporating a business (i.e. Trade as a Limited Company). Many Directors of Companies have had to give personal guarantees to Financial institutions, thereby reducing or eliminatiing the benefits afforded by limited liability. However overall there are still more positives than negatives in operating as a limited Company. The changes announced in the Government's 4 year plan in November 2010 where tax credits for Pensions will be reduced will make an even stronger case for trading as a Company.

Here are the main advantages and disadvantages of Incorporation.

Advantages

• Limited Liability 
• Lower Tax charge
• New ventures may qualify for start up exemption (3 Years) 
• Pension planning advantages
• Tax Planning opportunities in respect of the change in ownership between generations
• Transfer of business ownership is less complex and maybe assigned to several persons
• Potential extraction of surplus money at retirement
• Motor & Travel expenses for employees (Civil Service rates)

Disadvantages

• Higher annual administration and compliance costs
• Close Company tax surcharge
  • Investment Income
  • Service Companies
• Additional responsibility for Directors