When to move from Sole Proprietor to Ltd Co?

[InTheBlue]

I am trying to work out the parameters that will decide when I should move my small business from SP to Ltd.

Is it only tax that is the main concern and if so at what stage should I be thinking of changing status?

I have a very small turnover at the moment and have had so many expenses that I don't think I will see a profit for at least another year so do I just leave it as SP?

[sundaymorningstaple]

To put it in perspective, a Pvt Ltd company is an entity in of itself. Short of a Director deliberately abusing their position within the Pte Ltd, the Pte Ltd company is liable for any problems but the stock holder/directors are personally not liable.

However, a sole proprietorship has you as an individual as the sole owner without any protection. In other words, if you run a dive shop/tours, whatever, and you manage to kill someone while there are out on one of your tours and your company is found to be negligent, then not only could the company be sued for everything, so can you.

It's a pretty good reason to incorporate because it protects your personal assets, while a sole proprietorship open you up to possibly lose everything you own.

[ksl]

I am trying to work out the parameters that will decide when I should move my small business from SP to Ltd.

Is it only tax that is the main concern and if so at what stage should I be thinking of changing status?

I have a very small turnover at the moment and have had so many expenses that I don't think I will see a profit for at least another year so do I just leave it as SP?

As a retailer you are going to have difficulty breaking even the first 3 years, I would suspect you need to look at the distribution across the Island sports shops, to reach out to your audience, you also need to sell the value of your product. SMS is right, though with the Pte Ltd and liability. Have you also considered your pricing strategy

[InTheBlue]

SMS, I understand the difference between SP and Ltd in terms of liability and because I am not particularly worried about that side of things my concern lies around when to move to save the most on tax, get best tax breaks etc.

As I have a full day time job as well as the e-commerce site I understand that with 1 type of organisation I will be taxed at my personal rate and with the other I will be taxed at a corporation tax rate.

Trying to work out if there is a good time to cutover, liability aside.

[sundaymorningstaple]

If you are not so worried about the liability side of things, you would need to look at were the profits of the SP will fall as they will be taxed at the upper end of the tax rate depending where your salary/earned income finished at. You would need to also ascertain as to whether there are any tax breaks for the first 3 years on Pte Ltd net profits as there were a few years ago. (It used to be 100K/tax exempt for the first three years. Not sure if it's still applicable or not. Obviously if it is, and you are no where near those kinds of Net Profits on your SP, then you might want to just continue taxing at the upper end of the Personal Tax rates.

[InTheBlue]

SMS, so what I am hearing you say is that as long as liability is not an issue, I might as well stay SP whilst I am not making any profit?