Should I set up a limited company?
Deciding whether to set up a limited company depends on various factors, including your business goals, financial situation, and personal circumstances.
Here are some of the key points to consider;
Legal and financial liability.
A limited company is a separate legal entity from its shareholders. By forming a limited company, you can generally limit your personal liability for business debts or legal issues, as long as you operate within the legal framework. This can protect your personal assets in case of business related problems.
Tax implications.
Limited companies have different tax obligations than sole traders or partnerships. Limited companies pay Corporation Tax of between 19% and 25% depending on profits. The company directors will then pay dividend tax on dividend income from the limited company starting at 8.75% at the basic rate.
In comparison, most sole traders and unincorporated partnerships will pay both Income Tax and National Insurance which for many businesses results in an overall higher tax liability.
Credibility and perception.
Operating as a limited company may enhance your business's professional image and credibility.
Some clients, partners, or investors may prefer working with limited companies due to their perceived stability and structure.
Administrative and regulatory requirements.
Setting up and running a limited company involves various tasks, such as registering with Companies House and HMRC, maintaining accurate accounting records, and complying with legal obligations. Consider the time, effort, and resources required to fulfill these requirements.
Cost considerations.
While setting up a limited company can have benefits, it may also involve additional costs. You'll need to pay registration fees, hire an accountant, and meet ongoing financial obligations. Evaluate whether these costs align with your budget and do not outweigh the potential benefits.
The decision to set up a limited company should be based on a comprehensive understanding of your specific circumstances.
Consulting with professionals such as accountants, solicitors, and business advisors can provide you with personalised advice and help you make an informed decision.
For more information on setting up a limited company contact me at will@matrixaccountancyservices.com or click here - https://calendly.com/matrixaccounts to book a free consultation.