Why set up a limited company?

Why setup a limited company

Forming a company

If you run a business as a partnership or sole trader, you may have considered converting to a limited liability company. This month I’ll look at how setting up a limited company could help you and some other considerations of doing so.
 

How does it work?

If you are a sole trader, then you have personal legal responsibility for the business and its debts fall to you and you alone. A company on the other hand is a separate legal entity, so it can enter into contracts in its own right. A typical company will have one or more directors who work for the business and make decisions on the company’s behalf. Directors can be paid a salary. A company will also have one or more shareholders who own the business and can receive dividends (distributions of the company’s profits). Directors can also be shareholders.
 

Benefits

  • Under ‘Limited liability’ your personal assets, such as your house and car, are protected if the company goes bust
  • Potential for significant tax & National Insurance savings
  • Working as a company rather than an individual can often create a more professional perception of a business
  • It is usually easier to get outside investment if required

 

Other considerations

  • More administration is involved with submitting accounts and annual returns to Companies House
  • Some information about the company is held on public record so can be viewed by anyone

 

The process

A company can be formed online in less than a day. It is always recommended to take advice before doing so to ensure it is set up in a way that suits the needs of the business and its owners.

If you would like a free consultation to help you decide whether a company would be useful for your business, please get in touch.

Please Email or call me for a no-obligation chat

Disclaimer

The above is general guidance only and should not be solely relied upon without consideration of other factors which are too lengthy to go into in this article

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