The incorporation trap

TRENDS IN BUSINESS structures may come and go but the commercial advantages of limited liability are fundamental to a thriving business community. The company is therefore something of a fashion classic and many businesses see incorporation as an expected progression on reaching a critical size and stability.

As part of the natural commercial order successive governments have ensured that incorporation can be achieved without direct tax charges but indirect tax in the form of SDLT can still add significantly to the costs particularly for property-based businesses.

Improvements

In some respects the stamping regime on incorporation has improved recently. FA 2002 s 116 removed the stamp duty liability for transfers of goodwill from 23 April 2002 onwards and as most other assets pass by delivery stamp duty will only be applicable to incorporation where exceptionally business assets include parcels of...