Deciding whether to incorporate your Practice has been a decision that Private Practitioners have delayed in the past. Each individual practice will need to be analysed as to the potential benefits which could be achieved by incorporation – making the right decision can realise significant benefits in the future.  

In many cases there are substantial benefits to be realised especially if there are plans to exit. By effectively separating the Practitioner from the Practice, a brand identity strategy can be implemented. By doing this a final valuation can be increased by up to 4 times. There are a number of advantages as well as disadvantages that need to be considered and these are tabled below:

Advantages	Disadvantages
Normally provides limited liability.	Set-up costs.
Legal continuity.	Customers, suppliers and service providers must be informed of a change to limited company status.
Ownership can be readily transferred.	Tax position can be complex (but in the main can prove to be advantageous in the future).
Increases the amount that can be borrowed compared with a sole trader or partnership.	Annual Accounts must comply with the requirements of the 2006 Companies Act.
Shareholders can be paid in dividends (currently free of NICs) but strict company law formalities must be observed.	A company’s accounts must be filed on public view.
The National Minimum Wage does not apply to directors (as they are office holders) unless they have a Contract of Employment.	A company must file corporation tax returns.
Growing businesses can re-invest profits after an overall tax charge of 21% (if profits are below £300,000), compared with 41% for higher-rate tax paying sole traders and partners.	Funds withdrawn from a company normally give rise to tax liabilities.
Accumulated funds could be withdrawn on a winding up under the capital gains tax (CGT) regime which reduces the CGT rate of 10%.	Remuneration for directors is subject to both employee’s and employer’s National Insurance liabilities.
Corporate status can add to the credibility.	Tax on directors’ remuneration paid monthly.
A company can establish a registered pension scheme, which may provide greater benefits than self-employed schemes.	The ‘IR35' legislation relating to personal service companies could be relevant.
Employees may, with adequate safeguards, be offered an opportunity to buy their own stake in the business, reflecting their commitment and importance to the company.	Companies pay tax on capital gains at their corporation tax rate (21% for profits up to £300,000).
The liability of executers acting for deceased shareholders, or of trustees, is clearly defined.	An individual has greater flexibility in dealing with trading losses.
	A company director is more at risk of criminal or civil penalty proceedings, e.g. for late filing of accounts or for breaching the insolvency rules.