Why set up 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. In this article 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.


  • 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 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

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