Entrepreneurs are either starting or growing their business, but what happens when you want to cash out your contractor company?
There are several different ways of doing that and this blog post is about a particular sort of company ... the contractor company.
If you are a day rate contractor and run a contractor company you may well have built up a cash balance and are looking for a way to take that out of your company. We help our clients to carry out this process and there are a few tips and tricks to be aware of.
Option one is a 'liquidation' and getting all of the money out as a payment to you and trying to make use of Entrepreneurs' Relief. If you are a shareholder of your own limited company then you can potentially get this ER relief, but there are criteria. Why should you be interested? Because you can cash out your company at a 10% tax rate!
Option two is 'striking off' the company using Section 652 of the Companies Act. If you have a small amount of money in the company (under £25k) then this also enables you to potentially use Entrepreneurs' Relief. Why should you be interested? Because this is a DIY or low-cost option.
Obviously, the key to cashing out a contractor company is being able to get Entrepreneurs' Relief and only pay 10% tax on the first £10m. The criteria for getting ER are:
If anything I've said here resonates with you and you'd like to find out more, call me on 01234 752 566 or leave a comment below and let's see how I can help you.