Setting up a new business can be daunting. With so many paths to take, the world is your oyster, and whilst this is an exciting position to be in, it’s understandable why some people may feel a little anxious. One of the options you will become faced with is choosing whether to operate as a limited company or as a sole trader.
To help you make a decision, in today’s blog, we’re looking into the many advantages of choosing to operate as a limited company. We will explore each benefit and explain how they can help you and your company. Additionally, we will also look into how our experienced and knowledgeable team can help you with your online company registrations by taking advantage of our company registration packages.
What is a Limited Company?
The adjective ‘limited’ poses a long list of connotations – some positive, such as limited edition, and others negative, such as limited availability. However, the word is very powerful in business terms and means that a company is an organisation in its own right. These private companies are responsible for their own debts and are separate from the owners (shareholders) or managers (directors).
Deciding to make your company its own legal entity, rather than choosing to be self-employed, comes with a plethora of benefits. So let’s take a look.
Limited Liability Protection
The most significant benefit of choosing to become a limited company is the reassurance of limited liability insurance. This means that you will not find yourself personally liable for any financial losses, and your personal assets will be secure. In addition, since your company is a completely separate legal entity, you will never become liable should the company fall into any trouble. This, of course, does not count for any fraud committed.
Choosing to become a limited company means that you will never have to worry about your personal assets should your business face any financial losses. This is a great weight lifted from the shoulders of the company owner and managers and a fantastic benefit for limited company formation instead of being self-employed.
Tax and National Insurance
Working as a limited company is incredibly tax-efficient, far more so than if you were to become a sole trader. For example, the current UK Corporation Tax is set at 19% of profits, whereas sole traders and self-employed traders can pay between 20% and 45% Income Tax on their earnings.
As a director and shareholder of a limited company, you may choose to take a small salary from your earnings but instead, draw your other profits in the form of dividends. Selecting this option minimises your National Insurance Contributions (NICs), as limited company dividends are not subject to pay NICs.
Having this surplus money is fantastic for your company and can help pay for operational costs and assist with expanding the business in the future.
Reputation and Credibility
Registering your business as a limited company gives you an extra layer of credibility, as it proves many things. First, it officialises your business and allows you to confirm that the company is legitimate.
Many people and other companies refuse to work with non-limited companies due to the high level of risk for their own business and finances. So, you can almost guarantee that you will find yourself with more business, more partners, and more professional relationships as a limited company.
Suppose you deal with personal customer data or large-scale construction projects. In that case, you will be expected to register as a limited company to gain the trust of customers, clients, business partners, and other companies.
Protection of Your Company’s Name
Part of the process of setting up your limited company is choosing a company name. This cannot be something that already exists as a limited company name, as once registered, it becomes protected by law. Nobody else can then use this name, or even a name deemed too similar to one already registered.
It’s because of this advantage that you should never wait around to register your limited company. Get in touch with our team today to find out how to form a company in the UK.
As a sole trader, no laws surround your company’s name, so it is entirely possible that one or more other companies are operating under the same name as your own. This could be highly damaging to your business and cause a lot of hassle and confusion as you grow your business.
How Can Company Registrations Online Help?
We hope that this blog has been helpful and you now have a better understanding of the advantages of operating as a limited company. As part of our services at Company Registrations Online, we provide information and guidance on our blog to help you during your limited company formation.
Additionally, we have an incredible range of company registration packages to suit a wide range of people and their companies. So, get in touch with our team today to get answers to your questions and to find out more about how we can help you out.