Incorporation ― introduction and procedure

Produced by Tolley in association with

Owner-Managed Businesses

Guidance

Many businesses commence in an unincorporated form as a sole trade or a partnership. Start-ups benefit from the simplicity and low administration provided by a sole trader structure in particular. Relief for opening years’ losses are also significantly more favourable for sole traders and new partners. Even once a business has become established, operating in an unincorporated form has benefits and may continue to suit the proprietor(s) indefinitely.

However, there is a distinct path for growing businesses whereby incorporation becomes a natural step.

Key reasons to incorporate

The key reasons in favour of incorporation tend to be:

•
limited liability allowing the mitigation of risks associated with expansion
•
tax mitigation
•
flexibility over income in respect of the timing and form of remuneration
•
a reduced perception of the administrative burden due to familiarity with running a business
•
a greater ease of attracting external investment
•
prestige value
•
certain tax reliefs are only available to companies, see the Calculating the tax benefits of incorporation guidance note

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Julie Butler

Managing Partner at Butler & Co Chartered Accountants & Registered Auditors

Julie Butler FCA is the managing partner of Butler & Co Chartered Accountants, a firm that specialises in agricultural and land matters. Julie has lectured extensively on proactive tax planning for farmers and landowners, with an emphasis on diversification and development. Julie's articles are published in the national accountancy and tax press and she is the author of the successful books Tax Planning for Farm and Land Diversification and Equine Tax Planning as well as being co-author of Stanley: Taxation of Farmers and Landowners with Malcolm Gunn.

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