Starting Out in the Accounting Industry
Entering the accounting world can feel overwhelming, especially if terms like LLP and LTD are unfamiliar. At Quantum Bookkeeping, we’re here to guide you. Our accountants work closely with you to ensure you understand the laws that apply to your business and help you optimize your financial processes.
We interact with hundreds of clients each week, many of whom share similar questions. Here, we address some of the most common inquiries to help you make informed decisions about your accounting needs before you consider our services.
Should I Operate as a Limited Company or a Sole Trader?
Deciding whether to set up as a limited company or a sole trader depends on your specific circumstances and business type.
Sole Traders are relatively easy to establish and manage, offering greater flexibility in decision-making and less paperwork. However, as a sole trader, you are personally responsible for all business debts, meaning your personal assets could be at risk.
Limited Companies provide limited liability, which separates your personal finances from the company’s finances, offering protection for your personal assets. However, running a limited company is more complex, involving more paperwork, legal obligations, and compliance requirements.
The best structure for your business depends on your specific needs and personal situation. It’s wise to consult with a professional advisor, such as an accountant, before making your decision.
How Much Tax Will I Pay?
The amount of tax you’ll owe depends on several factors, including your business structure, income, and allowable expenses.
If you’re a Sole Trader, your business income is treated as personal income and taxed according to personal income tax rates, which vary based on your income level.
For a Limited Company, the business will pay corporation tax on its taxable profits.
Tax rules frequently change, so consulting a tax professional or using reliable tax software is highly recommended to ensure you’re compliant.
Can I Claim Business Expenses?
Both sole traders and limited companies can claim certain business expenses against their income, which can reduce the amount of tax owed.
Common claimable business expenses include:
- Office expenses: Rent, utilities, and equipment (e.g., computers, office furniture)
- Travel expenses: Fuel, public transport, and accommodation
- Staff expenses: Wages and salaries
- Marketing and advertising costs
- Legal and professional fees: Accounting and legal services
- Training and education related to your business
It’s essential to keep detailed records of all expenses, as documentation is required to support your claims. Some expenses have specific conditions or limitations, so consulting with an accountant can clarify what you can claim.
What is Bookkeeping?
Bookkeeping involves recording and maintaining the financial transactions of a business or organization. This includes tracking sales, purchases, receipts, and payments in an organized and consistent manner. The primary goal of bookkeeping is to create accurate financial records that inform sound business decisions and ensure compliance with legal and tax requirements.
Key bookkeeping tasks include:
- Recording transactions: Using systems like double-entry accounting to consistently document financial activity.
- Classifying transactions: Sorting transactions into categories such as income, expenses, assets, and liabilities to clearly represent the business’s financial position.
- Summarizing and reporting: Compiling and presenting financial data in reports like the balance sheet, income statement, and cash flow statement.
Bookkeeping is a continuous process that requires regular attention to maintain accurate, complete, and up-to-date financial records. It can be managed manually or with specialised software. Small business owners may choose to handle bookkeeping themselves or hire a professional bookkeeper or accountant. Bookkeeping forms the foundation of accounting activities like preparing tax returns and financial statements.
Contact Quantum Bookkeeping Today
If you’re interested in learning more about our accounting services, reach out to our team at Quantum Bookkeeping. We’re here to assist with any questions you might have and provide the support you need to manage your finances effectively.
