Chris Thorpe compares the tax position between trading through a limited company or a partnership.
When considering the best vehicle through which to operate a business, tax is a major consideration which can affect that decision, but it’s not the only one; practical and legal issues should be considered as well.
A limited company is a ‘body corporate’ (i.e., a separate legal person). The company owns the assets, the profits, it conducts the business, pays its own taxes, employs its own people, can sue and be sued, etc. This ‘veil of incorporation’ insulates the business (and the inherent risks) from its owners, thus limiting their personal liability. Directors are appointed to run the business and the owners may appoint themselves as such; they are treated as employed individuals, like any other employee of the company, but subject to stricter rules under company law.
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