Although being employed as Self-Employment is the most popular way of doing business in the UK, there are significant advantages to running a Limited Company.

Being self-employed is the most popular way of doing business in the UK. However, there are significant advantages to running a Limited Company.

Below are listed some of the advantages that Limited Company owners enjoy:

1. Tax

For many people, one of the biggest advantages is the fact that running a company as a Limited Company allows you to pay less taxes than as a self-employed person.

Profits are then subject to the “UK Corporation Tax”, which is currently 19%. If you are a director and shareholder of a Limited Company, you can take a small salary and earn most of your income from dividends. You can thus minimize National Insurance Contributions (NICs), as dividends for Limited Company are not subject to NICs.

2. Separate legal entities

The Limited Company is completely separate from the private life of its owners. Everything from a bank account to ownership of shares, tenders and contracts is a purely business venture and is not associated with specific individuals.

However, in the case of a self-employed person, both the owner and the company are treated as one entity in terms of paying taxes and administrative activities.

3. Limited Liability

Running a company as a Limited Company literally means that you have the certainty of “limited liability.” If there has been no fraud in running your business, your “limited liability” means that you will not be personally responsible for any financial loss suffered by your company. It is therefore a way of additional protection in case something goes wrong.

Self-employed people are personally responsible for all debts and obligations of their company.

4. Professionalism and trust

In some enterprises and industries, having a Limited Company can provide a more professional image. If you do business with larger companies, you may find that they prefer to deal only with limited liability companies rather than with self-employed people. That gives you potential to engage in bigger projects and increase income.

5. Funding

Finding funds to start a business can be difficult for all new companies. However, due to the fact that the Limited Company is separate from its owners, it may be easier to secure the company’s finances compared to self-employed people.

6. Name

When you register your company with Companies House, your company name is protected by law. No one else may use the same name or anything deemed too similar.

As a self-employed person, you may find that someone else does business with the same data (name?). You can’t do anything about that, although it could harm your company’s name by association. The only way to overcome this problem would be the expensive and time-consuming procedure of changing the company’s name.

7. Shareholders

The Limited Company generates various types of shares. So, you can easily sell shares in the company or transfer ownership of shares. If your company has more than one shareholder, you should get a Shareholder’s Agreement that sets out the responsibilities of the shareholders. Such an agreement is also useful for specifying what people with shares can do and help if any of them wants to leave the business. If a shareholder wants to retire, sell his share or dies, it is much easier to transfer ownership of the Limited Company to another person.

8. Costs

Many people think that setting up a company as Self-Employment is much less costly in terms of start-up and operation. Establishing a Limited Company is not as difficult and expensive as one might imagine. Contact us for further assistance.

Nowadays, most of the matters related to the administration and running of a company can be dealt with online. Keeping online accounting will allow you to deal with your business matters much simpler and faster!

9. Pension

A Limited Company may finance the employee retirement pensions of its employees as a reasonable business expense. This means that pension contributions can be made before tax settlement.

This is another significant difference to self-employed people in terms of paying tax.