10 benefits of being a limited company
Many entrepreneurs in the UK work on a self-employed basis, because it’s seen as the simplest way to run a business. However, if more businessmen and women knew about the benefits of becoming a limited company, would this change the way they operate? Here are just ten reasons why you might want to change your business structure.
1. Your company is its own entity
As opposed to running your business as you, being a limited company means that your company is a separate entity to its owner.
2. You’ll pay less tax
Did you know that you’ll more than likely pay less tax if you’re a limited company than if you were self-employed?
Note: By 2020, you could even see the government’s Corporation Tax go down by 3% to 17%, thus saving you even more.
3. Your financial reward can be increased
As a limited company owner, you have the opportunity to pay yourself a basic salary and cash some additional profit as dividends. Dividends must still be declared, but won’t be subject to National Insurance Contributions, so you will ultimately be getting more from your earnings.
Note: Did you know that a limited company director can take out a director’s loan of up to £10,000 interest-free, and repay it within nine months of the year-end?
4. You can claim more expenses
If you travel, buy tools or dine with clients on a regular basis, some, if not all, of these expenses could be claimed back to make your business more profitable.
5. You can protect your brand
If you register your company as a limited company, Companies House will legally prohibit any other business from trading under the same name or one that is too similar to yours.
6. Limited company = limited liability
Being a limited company limits your personal liability, so you as an individual are protected in case anything goes wrong. This means that you cannot be sued for any of your personal assets in the event of an accident in the workplace, for example.
7. You’ll appear more business like
By becoming a limited company, you can obtain a more professional image and can break barriers that you couldn’t previously. Some large corporations will only do business with a registered company rather than a sole trader, in spite of the deal on the table.
8. You can save on pensions
As a limited company, you can make pension contributions that will attract higher tax relief.
Note: Did you know that under new government rules, every employer will have to offer their employees the opportunity to enter a workplace pension scheme?
9. You can issue new shares
As a limited company, you have the option to create new shares to offer to investors and/or existing shareholders. This not only helps you to raise the capital you need, but it also gives you the flexibility to control the company’s financial affairs, with fair voting in place.
10. You can sell the company on
If your plan is to eventually sell your business, then registering it as a limited company might be the best route for you. Selling a company as its own entity is far easier than any other business structure.