If you are making profits and generating cash in your limited company you want to be careful that you are not taking too much cash out.
Aside from the tax benefits of not taking cash out and the fact that a chunk of your cash will be owed to HM Revenue & Customs (for corporation tax), there is another reason…
I have seen many businesses with struggling cash flow problems which actually are profitable.
When I’ve looked a bit deeper, the business didn’t actually have any problems with cash collection or even cash flow per se, the problem was the business owner was taking all the profit and more.
Therefore, the business could never manage on its own two feet because all the cash was evaporating into the business owner’s pocket!
