The relationship between participators and their associates can have important implications on transactions with their company and others, explains Richard Curtis.
When advising those starting a business, the choice is most commonly between carrying on the trade as a sole trader or partner against trading through a limited company. We may stress the basic difference that the former is subject to personal income tax on the profits, whereas a limited company is a separate legal entity to the owners – paying corporation tax, and with separate liabilities arising depending on how money is drawn by the owners.
However, that distinction (i.e., that the company's money is not their own) is not always fully appreciated by the directors and shareholders, and the Taxes Acts also recognise that the owner managers of small ‘close’ companies may arrange its affairs to give tax advantages to the company and themselves.
