Considering becoming a Limited Company?
We explore the advantages and disadvantages of transitioning to a Limited Company and the services we offer.
There are many advantages to becoming a Limited Company, some of which are listed below.
Tax efficiency is one of the main reasons why sole traders opt to become a Limited Company.
For example, the Director of a Limited Company would usually take the maximum tax-free income up to their personal allowance of £12,500 as salary. The rest of their income would be taken in the form of dividends.
The advantage of receiving dividends is that you don’t have to pay a National Insurance contribution on them. It is worth noting that Limited Companies that qualify for the “Small Company Profit” i.e. their taxable profits are below £50,000, would pay Corporation Tax of 19% on profits, BUT this is lower than the 20-45% tax you would pay as income tax as a Sole Trader.
Limiting your liability is another reason that you might choose to become a Limited Company. Your business becomes a separate legal entity and so you are not personally liable for any debts that it incurs, as would be the case if you were a Sole Trader, thus protecting your personal assets and finances.
A more professional look. Operating as a Limited Company makes your business appear larger and more professional and this can genuinely make a difference to how other organisations and customers perceive you. You might even be considered for jobs that may not have come your way as a Sole Trader.
An easy out. If you get to a point whereby you no longer wish to run your company, the business can be handed to someone else. Whatever the reason, it’s much easier to do a business transfer with a Limited Company than as a Sole Trader. This is because a company owns all assets in its name, from physical properties to equipment and money, so transferring ownership of everything to another person is a more straightforward process.
Protection for your business name. When you incorporate your business, you are offering its name a level of protection that it didn’t have as a Sole Trader. This is because names are registered at Companies House, so if you wish to trade under a specific name, becoming a Limited Company will ensure that no one else can use it.
If they do – or if they choose a similar name to yours – you can place an objection to it. The other company will have to change their name if Companies House agree it’s too similar. If you remain a Sole Trader, the name of your business can be registered and used by someone else.
Access to more financial opportunities. As the owner of a Limited Company, you have more financial opportunities available to you than Sole Traders. For example, you are able to raise extra capital by selling shares in the business to people interested in investing in your company. In addition to this, if you’re looking for a loan, you have a greater chance of obtaining one as a Limited Company due to the transparency of public records.
Just as there are pros and cons to being a Sole Trader, there are some not so positive aspects that come with being a Limited Company.
A more complicated setup – a Sole Trader simply registers with HMRC. Starting as a Limited Company means registering with Companies House and paying a fee to do so and the process can be daunting if you are doing it for the first time.
Complex accounts – managing the accounts of a Limited Company brings additional challenges that you won’t face as a Sole Trader. Some of the additional responsibilities that Limited Companies have include Payroll, Bookkeeping, and Tax Planning – not to mention Tax Returns, Business Expenses, and keeping Company Accounts up to date. Failure to correctly file tax returns can result in fines and other sanctions from HMRC.
Issues with ownership – as a Sole Trader, you make all the decisions. As a Limited Company, you may have Shareholders. These Shareholders will have a say in how the business is run and this may complicate matters.
Less privacy – as your business will be registered with Companies House, you will be sharing information about your company Directors, as well as Shareholders and Accounts. These records become publicly available to anyone who wants to access them.
Our service offering to Limited Companies
Incorporation of Companies
Registering your Company for taxes such as:
Pay as You Earn (PAYE for Payroll)
Pension auto-enrolment – this is a legal requirement
VAT (advice is available should this become a requirement)
Provision of a cloud-based accounting system
Preparation and submission of VAT returns
Annual Accounts preparation and submission to Companies House
Calculation and submission of the Annual Corporation Tax Return (CT600)
Completion and Submission of the Annual Confirmation Statement to Companies House
Registration of Directors for Personal Taxes
Completion of the Directors’ Annual Self-Assessments
We offer Fee Protection Insurance for an additional annual fee, to protect you against the cost of any HMRC inspection
"Ian was brilliant, he explained all queries about my tax return in a way I could understand. He responded really quickly and I’m definitely using him next year."
Get in Touch
We are based in Gloucestershire, but offer our services to all areas of the UK.
Simply fill in the form below or call us on 07804 596625 to receive a free, no obligation quotation. Alternatively, click on the Calendly icon to schedule a Microsoft Teams meeting (you don't need to be a user of Teams to use this function).