![]() This makes more sense than withdrawing all profits, paying higher rates of Income Tax, and reinvesting your own finances when the business needs additional capital. Rather than withdrawing all available profits each year and paying more personal tax on top of your Corporation Tax liability, you can retain surplus income in the business to pay for future operational costs and growth. These lower rates for companies offer greater flexibility for tax planning. Limited companies in the UK pay 19-25% Corporation Tax on profits, whereas sole traders pay 20-45% Income Tax on their profits. ![]() competing on an even playing field with other businesses in your industry sector.creating a valuable and trusted brand identity.expanding into different locations or markets.accessing a wider range of lending opportunities.Limited companies have more complex accounting and reporting requirements, their statutory compliance obligations are much greater, and their corporate details and accounts are published on public record where they can be inspected by other businesses and members of the general public.Ī more professional image, coupled with the benefits of corporate transparency, could also benefit your business in many other ways, such as: The difference in perception stems largely from the fact that incorporated businesses are more rigorously monitored. Never miss another confirmation statement deadline Whilst the activities, ownership structure, and internal management of your business may be the same as when you were operating as a sole trader, companies are held in much higher regard and create a better impression. Your professional status and image will improve considerably when you start trading as a limited company. If any such situation were to arise while running your business as a limited company, you would not be forced to use your own assets to cover these liabilities unless you gave a personal guarantee to the company or you were found guilty of wrongful trading or other criminal acts. Limited liability is crucial if you plan to provide high-value supplies or services that could lead to liability claims. Therefore, your personal assets, including your home and savings, could be seized to pay your creditors. ![]() If the business owes money, you owe money. As a sole trader, there is no separation between you and your business. They are personally liable for any and all business debts, losses, and liabilities. Sole traders, on the other hand, run a much higher risk. However, there are rare instances (such as fraud or wrongful trading) whereby the corporate veil might be ‘lifted’ or ‘pierced’, which may result in shareholders (and directors) being personally liable for company debts. This means that your liability could be as little as £1, depending on the number of shares you issue and purchase. It is common practice to set the nominal value of most shares at £1. A Covent Garden registered office address for your business Beyond that, your personal assets will be protected. If your company becomes insolvent and is unable to pay its creditors, you will only be required to contribute the nominal value of your unpaid shares. Any debt, losses, or legal claims associated with the company are the responsibility of the company itself – not its owners (shareholders/guarantors) or directors.Īs a shareholder, you will have no legal obligation to pay more than the nominal value of the shares you hold. This separation is known as the ‘corporate veil’. Therefore, the business is entirely separate from the people who own and manage it. This is because a limited company is treated as a separate legal entity a legal ‘person’ in its own right. Simply put, should your company run into trouble, your personal assets will be secure. The biggest benefit of forming your own company is limited liability protection. However, there are a number of other limited company advantages available. The principal reasons for trading as a limited company are limited liability, tax efficiency, and professional status. We will also outline the potential downsides of company formation when compared to the sole trader structure. To enable you to make an informed decision, we will provide an overview of the limited company advantages on offer. All Inclusive Package Special Offer - limited time only, save 50% ![]() This is due to the many professional and financial benefits it offers, all of which far surpass those available to sole traders or contractors working through an umbrella company. A limited company is one of the most popular legal structures for all types and sizes of businesses in the UK.
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