What are the Benefits of Setting Up a Limited Company?

2020 has been a tough year for the economy, and many workers are facing the reality of redundancy. It is, of course, a very difficult time for anybody, but if you’re in that situation right now, this could be the perfect opportunity for you to take a look at your skills and set up your own business. We think everyone dreams of owning their own business at some point in their career and so we’ve put together what we think are the top eight benefits of setting up a Limited Company, to hopefully inspire you to take the plunge (and how we can help you!).

What Exactly is a Limited Company?

A Limited Company is an entity that is created to enable a business to operate with multiple owners (and/or shareholders), limited financial liability, and the opportunity to raise capital by selling shares. A Limited Company is registered with HMRC and Companies House and will have certain obligations in place that must be adhered to.

Why Should I Set Up A Limited Company When I Could Just Be Self-Employed?

Self-employment is by far the most simple and speedy method of starting your own business. A straightforward form, which can be completed online, is all you need to do to inform HMRC that you will be setting yourself up as self-employed. Then an annual tax return is all that is required to communicate your tax liability to HMRC. But, our TOP EIGHT benefits of setting up a Limited Company, might just persuade you to take the leap and set up your own…

A Limited Company is its Own Entity

When a Limited Company is formed, it becomes an entirely separate entity to any owners and shareholders. All Bank Accounts, assets, and liabilities are in the company name. Which follows on to…

Personal Liability

When you become a director of a Limited Company, due to the company being its own entity, there will be no personal liability for any financial losses that may occur. You will have the reassurance that your personal assets will be safe and cannot be taken from you if your business falls into liquidation. You will only be risking any money that you directly invest in the business. If your Limited Company does fall into financial difficulty you might need…

Access to Funding

Banks and other financial institutions are generally more likely to invest in a Limited Company than a self-employed individual. This is not always the case, but raising capital might be vital to enable your business to grow, so if you’ve got big plans on the horizon, it’s certainly something to think about. But you could also…

Raise Capital from the Sale of Shares

A Limited Company is made up of shareholders, either one director with 100% or multiple shareholders with a number of shares each. To raise funds, shares in the company can be sold to investors to raise capital. However, these new shareholders will now have a say in how your company is run, so it is important to ensure that selling shares is the right move for your business.

Keep Your Brand Safe

Owning your own Limited Company means coming up with a unique name. There’s nothing more frustrating than finding out that the name you’ve chosen is already taken. When you are self-employed you can choose to ‘Trade As’ a business name other than your own name, but it will not be protected, there is nothing stopping anyone else from using the same name. When you register your Limited Company with Companies House, it means that you own the business name and nobody else can set up a business with the same name, limiting any confusion and a need for a rebrand or legal proceedings. This can help with…

Credibility

Having a Limited Company can help to bolster your credibility when working with larger businesses. Some businesses perceive Limited Companies as more professional due to the need to conform with stronger responsibilities and the limit of personal risk involved.

Who Will Take Over?

With a Limited Company, you will be able to put certain legal conditions in place to protect your business should you become incapacitated or pass away. You will be able to name a successor to ensure that your business will continue to run smoothly. It is more complicated to put these processes into place with legal backing if your business is tied to your self-employment.

I Can Pay Less Tax?!

In short, yes! When owning a Limited Company, many directors choose to pay themselves a minimal salary (generally aligning with the minimum tax-free earnings threshold for that year) and then pay themselves dividends (which can be paid monthly, quarterly, twice a year, or annually). Dividends are not liable for National Insurance Contributions so it can be more tax effective to opt for a Limited Company structure. Self-employment earnings are wholly liable for National Insurance Contributions. Corporation tax on profits can be considerably less than profits that you might make when you’re self-employed and there are several additional allowances and costs that are tax-deductible for directors of Limited Companies.

But, running a Limited Company is certainly not a walk in the park when it comes to your HMRC and Companies House reporting duties. So guess what – that’s where we come in! Backoffice Nationwide has worked with countless new Limited Companies, as well as some extremely well established large corporations, so we are experts at ensuring your accounts are kept up-to-date, filed on time, and accurate. We can help you overcome the sometimes overwhelming process of setting up your new Limited Company so that you can dive straight in and get down to business!