Written by Jennifer Johnson

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 125041 company byrepparttar 125042 owners as dividends from their shares andrepparttar 125043 amount of dividends drawn is restricted belowrepparttar 125044 40% band rate (i.e. œ31,063 for tax year 2002/03). That way,repparttar 125045 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 125046 higher rate bracket of income tax (i.e. above œ34,515), they will be taxed at 22.5% onrepparttar 125047 excess, which of course will increaserepparttar 125048 tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.

The most catastrophic scenario is whenrepparttar 125049 director takes his reward fromrepparttar 125050 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 125051 tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is thatrepparttar 125052 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 125053 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 125054 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 125055 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 125056 above, let's take a simple example. We have a limited company and a sole trader. They both make œ60,000 profits each inrepparttar 125057 tax year 2002/03. We assume thatrepparttar 125058 company director takes a salary equal torepparttar 125059 amount of his personal allowances (untaxed income) of œ4,615 andrepparttar 125060 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 125061 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 125062 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 125063 Inland Revenue has tried to reclassifyrepparttar 125064 self-employed. The 1% in NIC hike on staff salaries aboverepparttar 125065 NIC threshold from next April adds to bothrepparttar 125066 employees' and employers' tax burden and may more than offsetrepparttar 125067 saving fromrepparttar 125068 corporation tax zero rate onrepparttar 125069 first œ10,000 of profits.

Power Promte for FREE!

Written by Terri Seymour

When you first come online and are looking for a way to start your own business,repparttar information that you read can be overwhelming. Besides deciding what business you want to go into and designing and building your web site, you must now learn how to get people to come to your site.

It seems like an insurmountable task for people to find your site amongstrepparttar 125040 hundreds of thousands of web sites out there. Especially when most of us are businesses with budgets and often very strict ones. With this article, I am going to let you know about some ofrepparttar 125041 most effective promotion methods I have found and they are absolutely FREE!

*Writing Articles - Writing articles is a power-packed way of promoting yourself and your business. Not only do people read about your business in your resource box, but because of your articles you will become known as someone who knows what they are talking about and can be trusted.

Writing articles is not as hard as it may seem. Write about what you know and just write as if you were instructing a friend or co-worker. Do not be afraid to let your personality shine through. That is what will make your articles unique. After you write your article, you will need to get them out to other ezine and ebook publishers. Article lists are a great way of doing this. Subscribe torepparttar 125042 list below and submit those freshly written articles.

*Discussion Lists and Message Boards - Those who know me or have read my articles before know that I am an avid believer of discussion lists and message boards. As with articles, you can establish your expertise and build your reputation which in turn will do wonders for promoting your business. Offer advice, help, ideas and post as often as possible! Make sure you have an effective sigline. I have made sales, business contacts and obtained subscribers just by welcoming new people to a group.

Be sure to followrepparttar 125043 guidelines for each group/board. You do not want to be accused of spamming! Get started with these groups & boards:

*Ad Swapping - If you publish an ezine ( which you most definitely should), ad swapping is a great way of getting your ad out there for free! Find other ezine publishers looking for swaps and send them an email asking if they would be interested in swapping. Tell them a little about your ezine and let them know where they can see a sample copy. If you don't know where to find other publishers to swap with visit these sites:

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