Investing company money that has built up within a business bank account poses a challenge to many company directors. If you are a dentist that has decided to incorporate (or perhaps you’ve already done it), or a doctor with private earnings that has incorporated, one of the main differences you’ll have noticed is that there is now another party in your business life. Click monex lawsuit
The Limited company
Beforehand, life appeared to be simple. You earned your net profits, your accountant prepared your accounts and then informed you how much tax you had to pay in January and July. The after tax net profits were yours to keep and you would usually save any excess in a savings account, offset mortgage or allocate it to investments such as ISAs and pensions.
How easy it all was!
Since you set up your Limited company (which you now work for as you’re an employee), on the advice of your accountant your salary has reduced to a little over £5,000 pa and, as you feel you might struggle to live on this, you are also receiving dividends each month, as well as periodic dividends as and when required. But wait a minute, prior to setting up the Limited company your net profit was £150,000 pa and the turnover of the business has actually increased slightly since then.
Where has all the money gone?!
Of course, as you’ll know the answer is that it’s still there. The difference is that it sits within the Limited company bank account. The company has its own tax rates (corporation tax) and your accountant is the best person to advise you with regards extracting profit from it. But one question we’re being asked more is what to do with the cash that sits within the company? Where can you put it to get a reasonable rate of return? The starting point is to realise that the savings/investment choices of a Limited company are not too dissimilar from your own as an individual.