FFA's are a waste of time..........or are they?

Written by Cas Amato

According to a new survey carried out by Alliance & where ID_NUM=9270; Leicester, one in five small business owners view tax as their greatest concern. The Chancellor has announced in his last budget that companies with profits below œ10,000 will not have to pay any corporation tax with effect from 1 April 2002. The question to be asked is: does that announcement make incorporation a more attractive option compared to being a sole trader?

The answer is that from a tax point of view, it is advantageous to trade through a limited company as long asrepparttar income is drawn fromrepparttar 128353 company byrepparttar 128354 owners as dividends from their shares andrepparttar 128355 amount of dividends drawn is restricted belowrepparttar 128356 40% band rate (i.e. œ31,063 for tax year 2002/03). That way,repparttar 128357 owners have no further personal tax ("income tax") to pay. Moreover, dividends are not subject to national insurance contributions. This is excellent news of course. But, if dividend income falls withinrepparttar 128358 higher rate bracket of income tax (i.e. above œ34,515), they will be taxed at 22.5% onrepparttar 128359 excess, which of course will increaserepparttar 128360 tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.

The most catastrophic scenario is whenrepparttar 128361 director takes his reward fromrepparttar 128362 company as salary. Then his/her salary is taxed at income tax rates (like a sole trader's income). That is because, unlike sole traders,repparttar 128363 tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is thatrepparttar 128364 income taxes are higher than corporation tax rates. On top of that, they will be subject to employee and employer national insurance contributions, which of course increaserepparttar 128365 tax burden and render his position worse than even an unincorporated business ("sole trader"), because NIC Class 1 on payroll are higher than NIC Class 2 paid by self employed.

In contrast, a self employed person ("sole trader") is taxed at income tax rates onrepparttar 128366 profits from his business, which are added to his other sources of income. As it has already been mentioned, income tax rates are overall higher than corporation tax rates. On top of income tax, national insurance contributions class 4 are payable onrepparttar 128367 business profits within a specified band (7% on profits between œ4,615and œ30,420). National insurance contributions Class 2 are also paid by self-employed people, although those are lower than those payable by company directors on their salaries.

To illustraterepparttar 128368 above, let's take a simple example. We have a limited company and a sole trader. They both make œ60,000 profits each inrepparttar 128369 tax year 2002/03. We assume thatrepparttar 128370 company director takes a salary equal torepparttar 128371 amount of his personal allowances (untaxed income) of œ4,615 andrepparttar 128372 balance as dividends. The company will pay corporation tax at 19% equal to œ10,523 and nothing else. The sole trader will pay income tax œ16,542, National insurance Class 2 œ104 and National insurance Class 4 œ1,806. Total œ18,452. The bottom line is thatrepparttar 128373 person that has incorporated his business into a limited company will make a tax saving of œ7,929 compared to a sole trader! Isn't that fantastic?

Somebody might be wondering: why is this entire happening? The official explanation is that, this government, to helprepparttar 128374 economy grow, encourages people to leave as much profits within their businesses to be reinvested, instead of being taken out and spent.

The "unofficial line" is that, as a matter of fact, for yearsrepparttar 128375 Inland Revenue has tried to reclassifyrepparttar 128376 self-employed. The 1% in NIC hike on staff salaries aboverepparttar 128377 NIC threshold from next April adds to bothrepparttar 128378 employees' and employers' tax burden and may more than offsetrepparttar 128379 saving fromrepparttar 128380 corporation tax zero rate onrepparttar 128381 first œ10,000 of profits.

Google Wealth Pyramid

Written by David Cameron Gikandi

The absolutely fortunate thing aboutrepparttar Internet is that you can guarantee yourself a certain level of traffic, and certain profitability. This is usually impossible with many other businesses – but notrepparttar 128352 Internet. Here, we shall look at one sure-fire way of not only guaranteeing your profits, but pyramiding them, starting right now.

We shall proceed step-by-step.

1. Monthly unique users: Analyze your server log files using a good server log analysis software package that can tell you how many unique users come to your web site every month. Some web hosting service providers already give you log file analysis. Ask your web hosting provider whether they do. If your provider does not, download one from Download.com. For our example here, let us assume that you get 1,000 unique users a month.

2. Number of sales per month: Next, you need to find out how many sales you make per month on average. This isrepparttar 128353 number of units that you sell, notrepparttar 128354 sales value in dollar terms. For our example here, let us assume that you sell 50 units per month of whatever product or service it is that you sell.

3. Conversion ratio: Calculate your conversion ratio by dividing your monthly unique users by your monthly sales units and converting that into a percentage. In our example, that is 50 divide by 1000 multiplied by 100 which is equal to 5%.

4. Next, write down your gross profit on sales units. For example, if you sell downloadable software for $80 per unit, and your per unit costs are $15, then your gross profit per unit of sales is $65.

5. Now you know that for every 100 people that visit your web site, five percent of them by something on your web site that has an average value of $65 and that brings you a gross profit of $65 x 5 = $325. This means that you can afford to spend a maximum of $3.25 per visitor if you were to pay someone to bring you visitors to your web site ($325 divided by 100).

6. Find out what keywords people used to search for your web site. Again, analyze your server log files to find out what keywords were used to find you. That kind of information is there. Also, go to http://inventory.overture.com and see what keywords related to your web site are popular.

7. Go to Google.com and click onrepparttar 128355 AdWords Select link. More than 150 million times a day, people use Google to find what they're looking for. You can buy adverts on Google that appear whenever your chosen keywords are searched for. You pay only when a customer clicks on your ad, regardless of how many times it's shown. And from our research above, you knowrepparttar 128356 maximum you can afford to pay and remain profitable. In our example, that was $3.25 per click (per visitor). Google’s system is very easy. Set up your ads, selectrepparttar 128357 keywords you wish to have them appear, and selectrepparttar 128358 maximum amount you are willing to pay per click. Often, you will discover that you need far less than your maximum amount – perhaps just $0.07 to $0.80 per click, meaning your profitability is high. To increase your ads effectiveness, make an ad for each keyword and place that keyword inrepparttar 128359 title of your ad. For example, if you are buying an ad forrepparttar 128360 keyword ‘wedding gowns’ make a specific ad for t! hat keyword and make sure that your ad title containsrepparttar 128361 words ‘wedding gowns’ so thatrepparttar 128362 user mentally associates it with a good find.

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