FAQs

What is an audit, and do I need one?

An audit is often required by larger companies who's turnover or assets exceed a pre-defined limit. Companies that fall beneath this limit are not required by law to have an audit, although there are a number of very important reasons why an audit can be very useful to a small business.

Larger companies must have a statutory audit, and this consists (very basically) of pre-determined tests and system reviews to ensure that the accounting records and financial statements form a true and fair view of the companies affairs.

Which version of Sage is right for my business?

There are many versions of Sage that provide differing levels of ability, and choosing the right version is often the hardest part of the process of moving to a computerised accounting system.

For more information on this subject please visit our Technology section.

What is the difference between a partnership and a Limited Company?

A partnership is a group of people who collectively trade under a single trading name. Partnerships can contain unlimited numbers of partners, although obviously the minimum number is two.

A partnership is not in itself a single entity, but there are a number of rules, which must be considered before entering or forming a partnership. Arguably, the most important is the fact that regardless of your share in the partnership, in the event of liquidation, the entire debt could be requested from yourself.

A second point is that you are accountable for any losses the partnership makes, and thus any of your own personal finances, including your property could be used should the partnership run into financial difficulty.

A Limited company works in a much different way. Again, there are a number of people, who trade together under a single company name (which must be registered with Companies House).

A Limited Company has shareholders, each of which will hold a number of shares in the company. These shares 'limit' the person's (or businesses) liability to the initial value of the share when purchased. The persons who have shareholdings are entitled (at the company's discretion) to receive 'dividends' (rather than profits), and the directors of the company must take a salary, rather than drawings. Limited companies are taxed much differently from partnerships, and in most cases, the total tax payable will be lower than that of a partnership.

Many partnerships convert to Limited Companies for the above reasons. This is known as Incorporation, and can be an extremely difficult and arduous task, which is best left to an experienced and qualified accountant who can assess and maximise the tax benefits available.

For more advice on this subject, you should contact your local office.

Should I incorporate my business?

Incorporating your business can provide many benefits for growing businesses. These include the possibility of reducing the amount of tax payable on profits, and the ability to reduce your persional liability. It is wise to request advice from HW Chartered Accountants when considering incorporation for your business.