Richard Curtis looks at the rules relating to loans to directors, shareholders and employees.
There are many factors to consider when deciding whether a business should operate as a sole trader (or partnership) against the alternative format of a limited company.
However, perhaps one implication that does not figure highly in such matters is whether the proprietor realises that a limited company is a different entity to themself. This might particularly be the case if they had previously operated as (say) a sole trader before incorporating because, in that format, drawings from the business do not figure in its tax and National Insurance contributions (NICs) liability.
With a company, drawings will have an implication; basically, they will be either remuneration, dividends or loans. The first two may result in substantial tax and NICs liabilities for the recipient, but less so for the latter.
