Limited company account

🤝 Help
1

Hi all,

Is it possible to open a new account in the name of a limited company?

Thanks in advance

1 Like
2

for now its retail individuals only I believe.

2 Likes
3
1 Like
4

Little off-topic, why would you want to open an acc as a ltd? I have a ltd, but I don’t see what are the advantages of trading as a ltd instead of as an individual.

1 Like
5

Hey Darko, It helps if you are in higher tax bracket. Please correct me if I’m wrong

6

I’m not sure, so I would love to hear what you have in mind. I found some answers on crunch.co.uk, and also I asked my accountant, but she told me that she doesn’t know, and I will have to find another accountant because it’s different for that kind of companies.

I asked her about tax od dividends from the USA companies because I lived in Croatia before and I paid 30% tax on dividends. Ltd will have to pay 15% tax on dividends from the the USA because of treaty between uk and us, same as an individual (there is no advantage).

But in short lines, most effective way is to set your salary to £6,240 and the rest you can pay out through dividends if you have enough profit. But you will have to pay tax (7.5% <37500, and difference from £6,240 to £12500) so it’s the same. Or, too much pain for nothing.

7

Hello Darko. I am not sure how it works in your home country however I can give you a general overview of why somebody would want to trade under a company (Pty Ltd).

A company is considered a separate legal entity from its owner, so its assets and liabilities which includes taxes are separate from the owner.
Trading as a company thus gives you the following advantages:

  1. Tax, the company may still pay tax on its earned income from profits (plus deductions on a trading account) but since in most cases companies pay taxes after expenses it gives the trader the ability to book losses and expenses from his private trading operation, expenses such as internet line, research portals/subscriptions, laptop, computer, food etc , anything you spend on trading can be listed as an expense which technically decreases your profit and so you can end up paying less tax nominally. Many beginners make the mistake of not considering the money they spend to trade/invest as not expenses. Eg: everytime I go to a coffee shop I count it as an expense and pay using my trading bank card(makes proving the expense easier). So there is a major tax advantage in regards to the end tax you would pay in your home country for profits that you move back into your bank account.
    (They are profits on your trading account but once moved back in your bank account, the money is considered income and may be taxed as such and so you must show expenses incurred to generate the income and lower the tax you pay)

Personal tax risk is also decreased. If you trade/invest and withdraw that money to your personal account your tax collector will see it as personal income and this may result in you paying more tax but not being able to book your losses to off set taxes. Trading/investing as a company keeps your personal affairs separate.
Always count your expenses outside your trading account along with your trading account losses. Eg: you open a $1000 trading account and make a $50 profit, you are happy yet you spend $10 on internet line, $10 on research subscriptions, $10 on coffee. How much did you really make? $20, the company will be taxed on the $20 and not the $50 that came in unlike personal income.

Since you would be the shareholder (and director) of your company, you could easily sell the shares to your children or add them as directors and compensate them with your company shares (Darko Ltd) and not long they would own 100% of the company, meaning whatever shares your company owns in your trading account would now be theirs…which is a nice way to pass your assets on before you kick the bucket and avoid stupid death taxes.

There are plenty other advantages but I thought let me high light those fun ones.
Here is a fun question…
If you’re married in community of property and you get a divorce,
What happens to your trading account? :wink:

8

Thank you @MoneyMondays for a comprehensive answer. Is it even possible (in the UK) for Ltd to operate (have expenses) without issued invoices (clients/buyers)? I suppose that I will have to pay an accountant much more (at least my current accountant say that) because its different way of bookkeeping (for finance companies). But it’s not a usual finance company which manages clients ’money and charge % for their services, in this case, Ltd has expenses, but doesn’t have any income from selling goods or services.

Wouldn’t that be suspicious that a company that hasn’t issued a single invoice has (high) expenses?

I understand what you say for expenses, but, for example (maybe I missed something). I’m unemployed but I have £500k that I trade in the US stock market from which I have £40k from dividends. As an individual, I pay 15% withholding tax in the USA, and that’s it, I can spend £34k for paying rent, food etc.

In case I set up an Ltd to trade in the US stock market, that Ltd also pays 15% tax on dividends, but as a director I can’t use remaining £34k for paying rent, food etc, because it’s not my money (ltd is a separate entity). Do I have to pay tax on dividends (again?) or give myself a salary and also pay nino etc to take money out of my ltd that I don’t have to pay as an individual investor? Also I have to pay for an accountant, etc… It depends, but I’m not sure that it’s better to invest through Ltd.

I never thought about it :smiley:, but true, one of my divorced friends had major problems, frozen account in the middle of the finance crisis '08. Other sold (through recapitalization) 14% of his company, after divorce his ex-wife sold her share (38%) so he is not the largest shareholder anymore.