Are you looking for limited company advantages in the United Kingdom? Do you need an attorney or lawyer to help?
During 2020 there were an estimated 2 million trading limited companies in the United Kingdom. It is an increasingly popular business module and now the second most popular way of setting up a business.
With a range of benefits and pitfalls, here’s all you need to know about limited companies, including; what they mean compared to other structures and what their advantages and disadvantages are:
The advantages of a limited company in the UK
There are a great many advantages to setting up a limited company. Here they are:
A sole trader would have to pay between 20 and 45% tax on their profits. For a limited company, this is a fractional 19%, making it much more tax-efficient and why it is such a favourable business model.
If a limited business incurs debts and fails to succeed then the owner is not personally responsible – your home, assets and personal finances cannot be taken into account to cover debts. Although if you can keep your business afloat using your personal assets then you are free to do this.
Business Law In England
The director of a limited company has no attachment to the companies actions, therefore is not accountable for any business failures. A sole trader cannot detach from their business and are seen as one unit, giving no protection if the company fails.
Trademarking a limited company protects it from others being able to use the name, or trade under the same name. This also means that you can easily be found online and with over 80% of consumers now using online search engines to research local businesses, this is something you need to be a party to.
In addition to this, limited companies can appear bigger than they actually are making them seem more professional thus more attractive to potential investors and/or consumers/clients. This could also mean that directors of limited companies may find it easier to obtain funding, such as bank loans, as they appear a more secure option over a sole trader.
An owner of a limited company can invest pre-tax money into a business pension scheme. What this means is that the director is saving money for the future whilst securing a higher tax return amount right now.
The disadvantages of a limited company in the UK
With advantages, come the disadvantages and here they are:
It can be tricky to set up a limited business in the first instance and can often incur a fee. You also need to register with Companies House and provide them with your business records, accounts, directors and shareholders which is information that becomes published and accessible to anyone.
This reduces the amount of privacy the company has. You will also need to have the necessary insurance in place to cover you. Any staff and often public liability insurance too.
Any mistakes made in recording, or not recording properly, things that are required for tax returns can result in harsh penalties from the HMRC. It is essential that book-keeping is done thoroughly and regularly which often means hiring assistance plus a business accountant. Accountants can be extremely costly.
You can look into limited company formation in the UK and book a free consultation before making any commitments.