Setting up a limited company can be a defining part of a business. It’s a milestone that requires a lot of thought, some attention to detail, and a list of goals that you’re eager to achieve in this exciting next phase of your life.
But why should you contemplate registering for one? And what can it offer you? If you’re looking to set up a limited company, here are the main benefits of making this business move.
Reduced legal liabilities
If for any reason your limited company should encounter legal or financial difficulties, your own personal assets won’t be put into jeopardy. Due to the unique nature of a limited company, it is treated as completely separate from the company’s owners and managers.
In other words, any legal claims or debts that the company incurs are the sole responsibility of the company, not the owners, shareholders, and directors. This means that in the event of insolvency, you are legally required to contribute only the nominal value of your unpaid shares, while all personal assets remain yours.
Reduced overall tax
Generally speaking, a limited company will incur less tax, leading to bigger savings for your business overall. In fact, depending on your specific salary, you may even be exempt from paying income tax or national insurance (although please be aware that this may possibly affect your pension).
How are you paying fewer taxes? Limited companies are required to pay corporation tax, which tends to be lower than standard taxes that sole traders and employees incur.
A limited company has more appeal than a sole trader
A limited company carries a certain level of gravitas that adds a lot of credibility to your business simply by being one. In many business transactions these days, sole traders aren’t considered when it comes to handling complex or sensitive information, as it is now considered to be too high-risk.
Incorporated businesses want to work with similar businesses, and feel far more comfortable in doing so. This one change to your company can immediately establish your brand as a trustworthy and reputable one within your specific field.
Limited company owners are able to take dividends and a salary
When you’ve set up a limited company, you can pay yourself by salary or by dividends. For a salary, you can just transfer money from the company accounts to your bank on a monthly basis (depending on your income, it may or may not be subject to income tax and national insurance).
For dividends, you’re able to take them directly from the company profits yourself once all necessary outgoings and taxes have been paid.
Your company name will be protected
Because every limited company is legally required to register their name with Companies House, you’re providing complete protection of that name and ensuring that your company name cannot be used by any other businesses.
This small requirement of a limited company can save you months of legal issues and hassle in the event of a competitor trying to use the name for themselves.