Fri 07 / 09 / 12
Why to Go Limited
Why should you go limited?
When establishing your business, it’s important to start as you mean to go on. For many freelancers, contractors and other one-person enterprises, incorporation can be an intimidating and confusing hurdle. However, contrary to popular conception, it can be done simply, cheaply, and has several rather attractive advantages.
Online formation
Think incorporating means stacks of paperwork and sending your passport and birth certificate to Companies House? Think again - it can be done online in just a few minutes. All that is required is your personal details, where the business is based, and a few security questions. It needn’t be costly, either. Forego upsold extras like leather-bound incorporation certificates and expensive company bank accounts and you can end up paying less than £5.
Tax efficiency
By incorporating you can take advantage of corporate tax law to make sure you’re only paying a much tax as you need to be. This isn’t some Jimmy Carr-esque tax dodge, it’s simply obeying the rules. Sole traders and employees pay Income Tax of 20% (up to £34,370), plus National Insurance Contributions on all earnings.
If you are a company rather than an individual you will pay Corporation Tax of 20% on just your profits! There are also various tax reliefs that only companies can take advantage of, such as claiming tax relief for your company Christmas party.
Limited Liability
One of the main reasons for incorporating is to limit your personal liability. As you and your company are separate legal entities, you cannot be held liable for any debt owed by your company. If the worst should happen and your fledgling enterprise goes bankrupt (which in the current economic climate is a real possibility), your possessions cannot be touched by your creditors.
Nobody wants to think about worst-case scenarios, but limited liability can very realistically mean the difference between losing your business, and losing everything.
Financial Independence
As a separate legal entity limited companies have their own financial records and credit histories. This means that if a bad credit score or other debt is preventing you borrowing more money grow your business, incorporating could help.
Room to grow
Separating you the person from you the business by incorporating gives you much more freedom to decide the future of your business. Want to take on some investment? No problem, you can give away some shares! Want to take on employees? Go right ahead. Want to sell your business wholesale to a third party? You can do that too, if you want.
As a sole trader you are inextricably tied to your business, but by going limited you are overseeing a legal entity which, as the Director, you can do what you like with!
ByCrunch, www.crunch.co.uk
When establishing your business, it’s important to start as you mean to go on. For many freelancers, contractors and other one-person enterprises, incorporation can be an intimidating and confusing hurdle. However, contrary to popular conception, it can be done simply, cheaply, and has several rather attractive advantages.
Online formation
Think incorporating means stacks of paperwork and sending your passport and birth certificate to Companies House? Think again - it can be done online in just a few minutes. All that is required is your personal details, where the business is based, and a few security questions. It needn’t be costly, either. Forego upsold extras like leather-bound incorporation certificates and expensive company bank accounts and you can end up paying less than £5.
Tax efficiency
By incorporating you can take advantage of corporate tax law to make sure you’re only paying a much tax as you need to be. This isn’t some Jimmy Carr-esque tax dodge, it’s simply obeying the rules. Sole traders and employees pay Income Tax of 20% (up to £34,370), plus National Insurance Contributions on all earnings.
If you are a company rather than an individual you will pay Corporation Tax of 20% on just your profits! There are also various tax reliefs that only companies can take advantage of, such as claiming tax relief for your company Christmas party.
Limited Liability
One of the main reasons for incorporating is to limit your personal liability. As you and your company are separate legal entities, you cannot be held liable for any debt owed by your company. If the worst should happen and your fledgling enterprise goes bankrupt (which in the current economic climate is a real possibility), your possessions cannot be touched by your creditors.
Nobody wants to think about worst-case scenarios, but limited liability can very realistically mean the difference between losing your business, and losing everything.
Financial Independence
As a separate legal entity limited companies have their own financial records and credit histories. This means that if a bad credit score or other debt is preventing you borrowing more money grow your business, incorporating could help.
Room to grow
Separating you the person from you the business by incorporating gives you much more freedom to decide the future of your business. Want to take on some investment? No problem, you can give away some shares! Want to take on employees? Go right ahead. Want to sell your business wholesale to a third party? You can do that too, if you want.
As a sole trader you are inextricably tied to your business, but by going limited you are overseeing a legal entity which, as the Director, you can do what you like with!
ByCrunch, www.crunch.co.uk
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