{"id":1188,"date":"2022-05-19T14:02:25","date_gmt":"2022-05-19T13:02:25","guid":{"rendered":"https:\/\/accountants247glasgowsouth.co.uk\/?p=1188"},"modified":"2022-05-19T14:02:26","modified_gmt":"2022-05-19T13:02:26","slug":"taking-cash","status":"publish","type":"post","link":"https:\/\/accountants247glasgowsouth.co.uk\/?p=1188","title":{"rendered":"Taking cash from your business \u2013 Directors vs Sole Traders"},"content":{"rendered":"\n

Every business owner needs to take cash out of the business at some point. But if you\u2019ve just moved from being a sole trader to a limited company, you may get caught out by the different rules around withdrawing cash from the company.<\/p>\n\n\n\n

\"Taking<\/figure>\n\n\n\n

Why are the rules different for directors and sole traders?<\/strong><\/p>\n\n\n\n

When you\u2019re a sole trader, you and your business are one and the same legal entity. So taking cash out is a simple procedure. But as the director and shareholder of a limited company, you and your business are two separate entities \u2013 and that means that money in the business is no longer your personal money. It\u2019s money that belongs to the limited company.<\/p>\n\n\n\n

Do I need to keep my personal and business money separate?<\/strong><\/p>\n\n\n\n

Regardless of which way you operate, you should always have separate business and personal bank accounts. The business account should be used to deposit all funds from sales and other business income, and to pay for purchases and other business running costs.<\/p>\n\n\n\n

As a sole trader, there\u2019s no legal difference between your personal and business funds. The main reason for a separate personal bank account is to keep your personal expenses separate from your business expenses. So, rather than mixing up things like mortgage or house rental payments, groceries and household bills with your business expenses, you have two distinct accounts \u2013 one personal, one business.<\/p>\n\n\n\n

If you need money for personal expenses, you just transfer it from the business account to your personal account \u2013 it\u2019s all yours to do what you want with. Obviously, you need to leave enough in the kitty to pay suppliers when their bills become due. But, as a sole trader, there\u2019s nothing to stop you draining the business account completely, if you want to.<\/p>\n\n\n\n

How do I draw money out as a limited company director?<\/strong><\/p>\n\n\n\n

For a limited company, it\u2019s a legal requirement to have a separate business bank account. Even if you own the company 100%, the money in the company bank account belongs to the company, it does not belong to you.<\/p>\n\n\n\n

So, how do you take out money to live on?<\/strong><\/p>\n\n\n\n

There are four ways of taking money out of the limited company, and in each case you should do it by transferring funds from the company account to your personal account. Preferably you should make these separate transfers, even if they happen on the same day.<\/p>\n\n\n\n