Sole trader, Limited Company or what?

[Newbeeneil]

Following the comments on another thread, what are the general thoughts on how you would run a small beekeeping business?
I run mine as a Sole Trader because I didn't want to jump through all the hoops of a running Limited Company but what do others do?

 

[Michael Palmer]

Probably the same there...Rather than being a Sole Proprietor business, my attourney suggested I become an LLC...Limited Liability Corporation. This protects our private assets so only the company assets are at risk from lawsuit

 

[pargyle]

A limited company in the UK has some advantages ... but - when a business is effectively a one man band you are arguably better off as a Sole Trader - or if sharing it with family or friend - a parnership. Limited companies separate the 'business' from your personal assets in the event that anything goes wrong. But the usual risk is from borrowing (bank loan, overdraft etc.) and not being able to meet the terms of the borrowing for some reason (health, accident, injury, disastrous business failure) but the reality is that, these days, if someone or an institution is going to offer you a loan or line of credit then they will be looking for either collateral or personal guarantees ... and you will still be liable personally even in a limited company, as a Director.

If the business grows to the size where you are employing people, have multiple assets, premises and costs solely associated with the business then you may be better of with a limited company - more so if there are directors and shareholders outside of your immediate family (and even then directors agreements are well advised - just in case - fall outs are not unhead of even in families).

 

[Newbeeneil]

A limited company in the UK has some advantages ... but - when a business is effectively a one man band you are arguably better off as a Sole Trader - or if sharing it with family or friend - a parnership. Limited companies separate the 'business' from your personal assets in the event that anything goes wrong. But the usual risk is from borrowing (bank loan, overdraft etc.) and not being able to meet the terms of the borrowing for some reason (health, accident, injury, disastrous business failure) but the reality is that, these days, if someone or an institution is going to offer you a loan or line of credit then they will be looking for either collateral or personal guarantees ... and you will still be liable personally even in a limited company, as a Director.

If the business grows to the size where you are employing people, have multiple assets, premises and costs solely associated with the business then you may be better of with a limited company - more so if there are directors and shareholders outside of your immediate family (and even then directors agreements are well advised - just in case - fall outs are not unhead of even in families).

That's is certainly the way I feel about it. I would never want to get to a size where I employed anyone again and the hassles of filing accounts etc were always a real pain when I was a director.
To be honest the biggest hassle was trying to close the company down. If you go bust you just walk away possibly owing millions but if you have paid all your debts and just want to retire you have to write to all your clients to ask if they have any claims on your business and then put an advert in the London Gazzette saying you intend closing the company down!

 

[Boston Bees]

Agree with the above in general. Limited company used to be far more tax efficient than sole trader, but most of the difference has been removed now due to tax rate changes.

But if the nature of the business is that you could be sued by clients, Ltd Co is the way to go. Suspect that isn't the case here.

 

[pargyle]

Agree with the above in general. Limited company used to be far more tax efficient than sole trader, but most of the difference has been removed now due to tax rate changes.

But if the nature of the business is that you could be sued by clients, Ltd Co is the way to go. Suspect that isn't the case here.

Or make sure that your third party liability insurance is the best you can get and covers every likely eventuality ... it won't save you if you are personally criminally negligent but for everything else - not something to skimp on ...

 

[Newbeeneil]

Or make sure that your third party liability insurance is the best you can get and covers every likely eventuality ... it won't save you if you are personally criminally negligent but for everything else - not something to skimp on ...

Indeed, even directors of companies are liable for that. Limited company liability is only limited to financial matters.

 

[ics19]

Going back to that other thread and sole trader accounting experience Honey names? the £1000 allowance is a simple option, but you are permitted to go down the actual expenses route and carry forward any losses to future years for a time if I've read it correctly. While expenditure should be fairly easy to account for (invoices etc), what sort of income records (in particular cash sales) is looked for? We've got a iZettle machine for card payments with all the records that it generates, but that's only part of the sales. I've guessing you're most likely to be challenged on declared income vs expenditure - does HMRC have a "hive count to expected income" rule book?(!)

 

[Flyboy]

Sole Trader is probably the best but if you are looking for a more independent entity which will shield you a bit more, a Limited Liability Partnership is a good compromise. It does not have all the admin of a ltd company.

 

[victor meldrew]

Probably the same there...Rather than being a Sole Proprietor business, my attourney suggested I become an LLC...Limited Liability Corporation. This protects our private assets so only the company assets are at risk from lawsuit

Must be a well fed lad to have a corporation?

 

[pargyle]

We've got a iZettle machine for card payments with all the records that it generates, but that's only part of the sales. I've guessing you're most likely to be challenged on declared income vs expenditure - does HMRC have a "hive count to expected income" rule book?(!)

No, they have better than that - they have computer programmes that they input your sales, costs and expenses etc. and it works on algoryhthms that generate what it considers as anomalies ... they look for these 'anomalies' and investigate those. Based on all the accounts they see every year from businesses in that sector.

I have a friend who owned a fish and chip shop ... mostly cash business ... he generated a reasonable profit and paid his taxes ... but he skimmed a nice bit of income off the top. The Revenue investigated ... they knew ... they went back years ... 10,'s of thousands in back tax and interest, 10's thousands in penalties, a further huge cost as they insisted on a nominated independent accountant to carry out an audit which he had to pay for ...

Never ever underestimate the Inland Revenue, they have turned over enough stones in the past to know which ones to turn over and what they expect to find under them.

 

[frankenstine]

they have got all the data they know, i think that if you know they are looking at you your allready stuffed.

my personal view is if your sole trader just insure well and that'll be fine once your employing someone if you own a house go LTD

 

[polymath]

Following the comments on another thread, what are the general thoughts on how you would run a small beekeeping business?
I run mine as a Sole Trader because I didn't want to jump through all the hoops of a running Limited Company but what do others do?

Here are two articles i wrote for BeeCraft on exactly this topic going through pros and cons along with the new tax regime around it. the first deals with should you become a limited company and the second covers do you need to declare honey sales under the new tax regime introduced. Should say i am not an accountant but a practical bee keeper but i am set up a Ltd company although the beekeeping is done as a trading as name under a broader company.

 

[Newbeeneil]

Here are two articles i wrote for BeeCraft on exactly this topic going through pros and cons along with the new tax regime around it. the first deals with should you become a limited company and the second covers do you need to declare honey sales under the new tax regime introduced. Should say i am not an accountant but a practical bee keeper but i am set up a Ltd company although the beekeeping is done as a trading as name under a broader company.

Thanks for that Polymath. Useful reading. Could be put as a sticky.

 

[ics19]

he skimmed a nice bit of income off the top

Thanks for the info - I wasn't look to skim anything myself (or for a friend!), more like trying to understand what's the best way to record and provide evidence should it come to it. I guess I partly answered my own question earlier, in that iZettle does allow you to record cash transactions as as well as process cards, so technically you could put all income through them for a single point of (dated) reference. Obviously more phaff than a notebook I that use now and anyone with a few K £ stuffed through their letter box each year could spend more time online than restocking their sales stall, but worth considering going forward.

two articles i wrote for BeeCraft

A couple of nice articles - just as a point of interest could anyone clarify "as a sole trader and you lose money one year those losses cannot be carried forward" - having filled in a few SA forms in the past, I thought there was a mechanism to do this for a SA 'business' ?

It might also be worth mentioning that a legit SA business claim for the actual expense option is for incurred mileage allowance, although there's a recommended recording method for that IIRC with a dated notebook for milometer readings etc -

 

[CaptainCymru]

Be careful an interest doesnt become a chore. Not to be negative but go the route that offers the least paperwork ,employs no one and costs you as little as possible to run .Have nothing to do with government agencies if you can and run the operation from your garden shed. Once you start getting into the realms of work place pensions , renting premises, business rates, accountants and various license, the parasites start taking the lions share .

 

[pargyle]

Be careful an interest doesnt become a chore. Not to be negative but go the route that offers the least paperwork ,employs no one and costs you as little as possible to run .Have nothing to do with government agencies if you can and run the operation from your garden shed. Once you start getting into the realms of work place pensions , renting premises, business rates, accountants and various license, the parasites start taking the lions share .

So true ... unfortunately, you find that you have to turn over at least three times what you can manage on your own in order to employ one person ... and in order to turn over three times what you can manage on your own - you need to employ FOUR people .. and an accountant .. and and and ... it's quite a massive leap from being a cottage industry, one man band, to becoming a Small to Medium Enterprise. You often find that rather than it becoming more profitable it becomes less profitable, the admin you then require adds to the hours you are doing and the additional costs do eat into the profits. It's easier to cut back to the bone if you need to in the years that don't meet your expectations - when there is only you to feed. When you have employees you face bigger responsibilities ... it's very hard to tell people you can no longer employ them.

 

[CaptainCymru]

So true ... unfortunately, you find that you have to turn over at least three times what you can manage on your own in order to employ one person ... and in order to turn over three times what you can manage on your own - you need to employ FOUR people .. and an accountant .. and and and ... it's quite a massive leap from being a cottage industry, one man band, to becoming a Small to Medium Enterprise. You often find that rather than it becoming more profitable it becomes less profitable, the admin you then require adds to the hours you are doing and the additional costs do eat into the profits. It's easier to cut back to the bone if you need to in the years that don't meet your expectations - when there is only you to feed. When you have employees you face bigger responsibilities ... it's very hard to tell people you can no longer employ them.

Dead right !For me doing business in Britain is no go to be honest , if the big department stores and food chains are folding what chance does the little man have .The taxes and paperwork is so excessive , you even need a data protection license these days that costs about 80 quid a year, all these things add up. Stick to a cottage industry , go about your business , fling a farmer a few jars /quid to keep some hives in fields and claim your mileage and expenses. Keep it as dead simple as possible and do your own accounts .As for liability insurance I think you get that with BBKA. Just have the least to do with any man that approaches you in a suit or wears a suit on the other end of the phone , they are there to extract from you not give.

 

[Apple]

"Hobbyist" selling at "farmers markets" are definitely on the HMRC radar as are those selling "just a few jars of surplus honey" into the corner shop.... as well as on line sellers.

Acquaintance who sold bric-a-brack at fetes etc and on line has just been picked up by HMRC.... did it just as a hobby and for a bit of "pin money" and now is facing a massive tax bill and possible custodial sentence for evasion!

With the Government spending out ££Billions on supporting tax dodgeing "Business" second home owners and their ilk, one would expect an increase in staff at the HMRC to collect every penny from anyone who may owe it!

Limited liability is not given as a place to hide!

 

[CaptainCymru]

"Hobbyist" selling at "farmers markets" are definitely on the HMRC radar as are those selling "just a few jars of surplus honey" into the corner shop.... as well as on line sellers.

Acquaintance who sold bric-a-brack at fetes etc and on line has just been picked up by HMRC.... did it just as a hobby and for a bit of "pin money" and now is facing a massive tax bill and possible custodial sentence for evasion!

With the Government spending out ££Billions on supporting tax dodgeing "Business" second home owners and their ilk, one would expect an increase in staff at the HMRC to collect every penny from anyone who may owe it!

Limited liability is not given as a place to hide!

I can guarantee without fail that they didnt magically pick them up , it would have been the age old British tradition of green eyes somewhere followed by a phone call