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Following the changes to National Insurance and corporation tax announced in the recent Budget it seems as though incorporation for virtually all small businesses is becoming irresistible. However we are reluctant to recommend this to smaller traders and 'problem' clients as tax savings aside it is a totally unsuitable vehicle for a whelk stall owner or taxi driver and the benefits may well be short-lived when the Chancellor realises the extent of his generosity.

Instead of incorporating an alternative might be for sole trader/partnership clients to simply introduce a newly-formed limited company as a partner. The idea is that the business carries on exactly as before except that the company as a general partner can be allocated a share of profits (perhaps all) which can then be either retained at the nil or 19 per cent rate and/or distributed as dividends free of...