Most People start off as a Sole Trader with it being quicker and easier to sort all the admin work. A lot of people are put off setting up a Limited company due to the considerable amount of legalities surrounding the procedure, However there are numerous pro’s to trading as a Ltd – especially with a proactive accountant to look after the admin side as well as helping you grow your business.
5 Pros of going Limited:
Tax efficient, with the ability to take dividends and the fact that there is no National Insurance payable on this compared to as a sole trader where your entire profits are subject to NI.
Limited Liability, essentially you aren’t personally liable to pay the debts of the company. If the company failed your personal assets wont be at risk. (unless you are guilty of fraud!) This added protection can give you peace of mind knowing whatever happens your personal assets aren’t on the line.
Professional Image, some larger firms prefer to deal with Limited business rather than sole traders, this mainly applies to contractors.
Access to finance, securing funding can be tough for all types of new businesses. However as a Limited Company it is a distinct entity from its owners and therefore may be easier to access finance compared to the individual equivalent.
Shareholders, This makes it easier to sell stakes in the company or transfer ownership. This helps you plan an exit strategy for the future, which can very easily be ignored until you wish you had thought about it sooner..
If you would like some advice on which route would be best for you personally, please get in touch with us so we can help you make the right decision. if you give the office a call or send over an email or if you would prefer we can arrange an in person consultation free of charge. Contact us here and include some information on yourself and what it is you’re unsure about.
A Limited company allows pension contributions to reduce your profit.
If you made a profit of £20,000 for the year and paid £5,000 into a pension this would bring your Profit down to £15,000. Saving tax whilst paying into a pension !