Business owners are throwing money down the drain because of the way their companies are structured.

Sussex-based business adviser Martin Pollins said if they were starting their companies today, many owners would choose a limited liability partnership (LLP) rather than a limited company.

He said: "Continuing with the old-fashioned limited company format could be seriously hurting pension and retirement plans.

"Why pay PAYE and National Insurance (NI)

monthly on salaries when you can pay much less in and pay it half-yearly?

"Don't take dividends -

this could be the worst possible thing for you to do. Don't put yourself in debt by paying for your company car personally when it could be run on the business without those crippling car and fuel benefits and those horrible carbon dioxide charges needn't apply either."

Mr Pollins said the difference could be staggering.

If three directors earning £50,000 a year each switched their business format from a limited company to LLP status, they would save so much money that if, for example, they put their new-found LLP savings into a pension scheme, they could each have a nest egg of more than £150,000 within ten years.

The opportunity to run a business as an LLP came into being on April 6 last year. It was meant for partnerships and businesses needing the benefit of limited liability but wanting none of the tax and NI disadvantages of a limited company.

It was not designed for existing limited companies to convert to the new status. But Mr Pollins has devised a way for them to do so.

In collaboration with Brighton law firm DMH, he has developed the conversion plan for privately-owned businesses which have a minimum of two directors. Directors'

salaries must be £100,000 or more in total, the company must have no outside shareholders and it should not be contemplating a sale within the next two years or going public within a short time.

The product is being licensed to accountants so they can offer it to their clients.