The answer is that from a tax point of view, it is advantageous to trade through a limited company as long as income is drawn from company by owners as dividends from their shares and amount of dividends drawn is restricted below 40% band rate (i.e. œ31,063 for tax year 2002/03). That way, 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 within higher rate bracket of income tax (i.e. above œ34,515), they will be taxed at 22.5% on excess, which of course will increase tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.

The most catastrophic scenario is when director takes his reward from 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, tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is that 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 increase 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 on 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 on 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 illustrate above, let's take a simple example. We have a limited company and a sole trader. They both make œ60,000 profits each in tax year 2002/03. We assume that company director takes a salary equal to amount of his personal allowances (untaxed income) of œ4,615 and 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 that 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 help economy grow, encourages people to leave as much profits within their businesses to be reinvested, instead of being taken out and spent.

How to Write a Fundraising Letter

(c) 2002 By Linda Elizabeth Alexander

The key to a successful fundraising campaign is writing a good letter. This may sound intimidating at first, but fundraising letters contain many of same elements as any good sales letter.

First, know your donors: Beginning with an updated list of past donors is key -- they will likely give again and may even increase their donations over time. Make sure to have a good, well-targeted, updated mailing list for new prospects as well.

In order to get people to read your letter, they must first open envelope. Include teaser copy on outside of envelope. This can be as simple as a printed line saying, "We need your help."

Early in letter, make your case -- quickly. Don't beat around bush. Tell about your organization or project at top of letter and get to point right away. What problem will this project solve? What need will it fill?

Appeal to your donors' hearts first with descriptions and anecdotes, then their heads with facts and figures.

If you are writing to previous donors, be sure to thank them first before you ask for more money. "Thanks for being such an important influence on our program in past. Last year's fundraiser was such a success, we're inviting you to help again ..."

Also, lose hype. Don't exaggerate or over-extend yourself. Nothing will destroy your credibility faster than sounding like a used-car salesperson when raising funds for a good cause.

As with other sales letters, longer copy pulls better in fundraising letters. I know, I know, "Nobody reads long letters." While most people won't read every word, more you can tell reader about benefits of giving, better response you will receive.