Setting up a limited company
Setting up a limited company has plenty of advantages that may be more worthwhile than going alone as a sole trader.
Here are a few reasons why you should set up a limited company.
A company name
One of the great aspects of setting up a limited company is that you can have your very own company name. Once registered the name is protected by law and no-one else can use it. Your name can become highly recognisable, making your business appear more professional to others who may collaberate with you; especially larger companies who may only do business with trade names. Don’t cut yourself short from opportunities; if you are looking for big collaborations and recognitions, change from a sole trader to a limited company.
For tips on choosing a company name check out Forbes’s Nine Factors for finding the right name for your business.
You will be much more secure with your finances. You are fully protected if anything should go wrong and the implications will not be put on your shoulders. If you were self-employed, you would not have any real financial security. It is not the individual who would take the blow; but the limited company, which gives you a bit of breathing space from the business itself. In the highly unfortunate case of the business collapsing, your own finances and properties would not be affected, which gives you a bit more stability within your personal life.
You will pay far less tax than if you were a sole trader which is a great benefit. The tax rate that you would be paying is approximately 20% at the current time, and will drop even further by 2020 to around 17% compared to 40% for sole traders. A limited company may pay through loans, dividends and PAYE; saving you huge amounts of money when it comes to paying tax. Therefore, you are able to keep more money that you have earned through the business.
Finding funding can be difficult for all types of businesses. However, securing business finance is easier for limited company than it is for sole traders as the former is a distinct legal entity.
Shareholders and Succession
A limited company is able to issue various classes of shares bestowing different rights on each shareholder including the rights to vote and collect dividends. Owning a limited company allows for the easy transfer of shares and selling of stakes in the company.
As a result, when a shareholder wishes to retire or passes away, it is far easier to transfer ownership and maintain a succession structure.
If you would like any further information on limited companies or company formations, please visit our website or give us a call today on 028 9055 9955.