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Archive for October, 2013

Benefits of a limited company

These are the five key reasons you should consider trading as a limited company.

Lower tax bills
Assuming you are making profits then trading as a limited company enables you to reduce the tax and National Insurance you pay.

The amount of the saving depends on the level of profit and tax year in question but the savings kick in at around £25,000.

If you do something wrong in your capacity as a business you can be sued.

Trading as a limited company provides protection of your personal assets because the person suing you can only go after business assets.

Keep in mind that you and we are moving to a more litigious society and customers are more inclined to use the legal system than ever before.

Also bear in mind that one of the people who may attack you is the taxman. If they believe you have made a mistake you could end up with a massive tax bill because they can go back many years.  Another example of someone who can sue is an employee. The maximum award for unfair dismissal from 1st February 2013 is £111,100.

Trading a limited company and being the Managing Director is more impressive than being a sole-trader. You can also register for VAT voluntarily which will create the impression of being more established than you are.

Raising money
If you are a sole-trader or partnership and want to get some investment, it can be quite complicated. But, with a limited company you can just issue shares.

And, if you trade as a limited company the bank can offer what’s called a Debenture or Floating Charge. This means the bank gets paid before any VAT or unpaid PAYE which can increase the likelihood of bank support.

When you trade as a company the money in the business is not yours.

If you want to take it you need to pay yourself a salary, repay money you lent the company or pay a dividend. This is sometimes seen as a negative but it’s actually good to treat the business as separate to you.

For a full review call today to arrange a meeting.

Are you a maverick?

Many people fear employing people and/or do not enjoy the management of business.

There are lots of theories of business and people management but an interest take on the topic can be found in a company in Brazil. The owner is Ricardo Semleris whose book “Maverick” is thought-provoking and fun.

His book was the all-time best-selling nonfiction book in Brazil’s history.  It has been covered by the news media worldwide and the Harvard School of Business. It tells the story of how he took over from his Dad and turned Semco (the company) upside down and inside out.

At the age of 21 Ricardo  took charge from his Dad after telling him he would do his own thing if he didn’t get 100% control. His Dad agreed and the first thing he did was dismiss the entire executive level. He went on to eliminate nine layers of management and allows employees unprecedented democracy in the workplace.

Ricardo’s objective was to create an environment in which others make decisions. There are no receptionists, no dress code and workers set their own salaries!

He turned an aging corporation into the most revolutionary business success story of its time that defied recession, constant strikes, overwhelming inflation, and more. The key is that workers participate in major decisions and share in 22 percent of the profits.

Profits shared are negotiated with workers, who then decide how to split the money. Employees work in clusters or teams and can paint their area how they see fit. Some look like the bad dreams of an interior decorator suffering from food poisoning.

Unions work with management and employees come in when they want to.

Before people are hired  or promoted to leadership positions, they are interviewed and approved by everyone who must work for them. Every six months, managers are reviewed by workers and results are posted for everyone to see. Profit and loss sheets are also posted. All workers are taught how to read financial statements.

Here are a few of the ways he revolutionized Semco:

  • Eliminated the traditional organization chart
  • Let workers set their own hours and pay scale
  • Encouraged workers to learn each other’s jobs
  • Encouraged workers to suggest changes in any department
  • Shared all company financial information openly
  • Limited all memos including marketing reports to one page in length
  • Allowed workers to review their supervisors performance
  • Accepted strikes as normal, vowed to maintain all benefits, and to never fire anyone during or after a strike


Could you use any ideas or a new approach in your business?

Want £100 a month extra in your pocket?

According to figures from the Taxpayers Alliance, the average family will pay over £650,000 in tax over their lifetime. But, if you are in the 25% of highest incomes of £80,000 a year your tax is double at £1.3m.

So, at Sackmans we think it makes as sense to do everything possible ensure you do not miss out of obvious tax breaks. So, it came as a surprise to discover that, according to research from Prudential, an estimated 182,000 higher rate taxpayers are missing out on pension contributions tax relief worth around £229 million.

Over a quarter of people survey who are paying pension contributions are not claiming the additional tax relief on their pension contributions. The research found the average person is turning their back on £100 a month.

The good news is that it is possible to reclaim tax relief you have missed out on and that claims can be backdated for up to three tax years.

Pension planning is one of the top tax planning strategies along with taking company profits using a combination of low salary and dividends. But, there are many ways to pay less tax including equalising income in families to maximise Child Benefit, making sure you claim all expense as well as timing when you incur business expenditure.

To make sure you are not missing out on tax savings book a tax planning review.


How much are you losing?

Exact software recently carried out a survey of small and medium sized businesses and estimate poor systems could be costing £3.7 billion.

The survey revealed one in five businesses admit to forgetting to invoice for goods and services. However, the biggest stress for SMEs is fighting for new business with cashflow and business planning also causes for concern. But, amazingly a quarter of business owners feel they are not in control of their accounts and business finances.

The implications for SMEs of weak systems, poor planning and fewer sales is serious. Nearly half admitting to paying suppliers late and 12% have failed to pay their employees on time.

Interestingly, business owners reported high levels of trust for their accountant but nearly 70% communicate no more than once a month. That is a minimum if you are working strategically with your accountant.

But, what surprised me was around a third of businesses still use Excel spreadsheets and paper records as part of the accounting function.

At Sackmans we believe new technology like Xero Accounting Software can help. This can be linked to other systems in your business to streamline internal systems. It also reduces the time spent on basic bookkeeping because of features like bank feeds. These automatically bring  in banking data without the need for manual entry.

The budgeting feature can help with planning and control. You can plan for the future and report against targets.

Budgeting is a key part of our Get Set service for pre-start businesses as well as our On-Track programme.

If you want to make sure you are maximising your business to the full then get in touch and book a free review.