Every person dream of owning their own business. But sometimes, getting tangled up in everyday life can be a challenging game, and you can get messed up in several things before you even know it!
The most worrying part of forming a limited company is the fear that you will not succeed, but the right planning and hard work will help you achieve your goals. We will take a look at why starting a limited company in the UK can benefit you and your business.
1. Tax
If you own a business, one way or another, you will be subjected to be paying tax. Forming a limited company, you do not need to pay any tax on income or national insurance, instead, you will be subject to paying corporation tax on profits related to their business as well as less any allowable expenses.
2. Separate Legal entity
Forming a limited company in the UK will allow you to have a separate legal entity from its directors of the company. The third-party signs a contract with the company itself, instead of signing a contract with its management personnel in person, to provide a certain degree of security for the relevant people involved. Whereas being a sole trader liability will fall on the individuals if the business happens to go bad.
3. A Professional Image
The fact that the limited company was formed shows a professional image, which could be a key factor when obtaining a new contract with others. The status of a limited company also encourages the trust and confidence of customers and can attract greater business. In some industries, larger companies will only trade with limited companies because they believe this structure is more reliable and more durable than the status of self-employed individuals.
4. Easier Funding
What if you need to find funds? Having a limited company in the UK comes with a lower risk of lenders, making it easier to secure funding for your limited company. If you are a sole trader looking to obtain funds, you may be at risk of paying a higher rate of interest due to the risk factor of being involved with being a sole trader.
5. A Fixed & Unique Name
When people opt for opening a new business or if they opt to setup a startup, they render a lot of thought into the business name, they pay a hefty amount of money to design a logo and website. Naturally, they want their business to be perfect and succeed from day one.
When deciding on a business name it is always best to check first if the website URL is available to save yourself a headache later on, choosing a name can be difficult at times, but when you are choosing a name for your limited company it is always best to have a business name that represents what you and your limited company will be offering. The name will therefore be registered with Companies House and will not be able to be used by other businesses in the UK.
6. A Grip Of Shareholders
Since companies can issue different types of shares, it is easy to transfer ownership and attract external investment. As a company director, you can better control when profits are distributed to shareholders, which may be beneficial from a tax perspective.
7. Getting Pensions
Forming a Limited company in the UK will allow directors to have a tax advantage, whereas when you are a sole trader, do you get the pension? NO! On the other hand, if you form a limited company in the UK and trade under it, you will be eligible for a pension, setting you up long term for retirement.
8. Forming a Limited Company in the UK
The cost of setting up a limited company in the UK starts from as low as £12.49. The UK is one of the cheapest places in the world to form a Limited company so the initial cost may not be as high as commonly believed. Using a formation agent, you will be able to add on lots of options for example an online accounting system which will make the accounting process faster and easier, so your accountant may not charge as much for their time, also you will be offered a free UK bank account to keep your personal and business accounts separate. Subject to the bank’s terms and conditions.
9. Future Plan
Starting a sustainable limited company in the UK will allow you to structure the business for the future sale of the company, whether it is passing it on to your children, family members or selling the company on, making it a more attractive and simpler option than selling or passing on as a sole trader.
Intrigued by this all? Let us help you in your journey, and we will fulfil the desires of your company to all extents!
Seed Formations is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.
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