UK Business - Limited Company Advantages

Behind moving house, it is often said that starting a business is the second most stressful thing to do in your life, though many new parents may contest that fact. The process of starting a business can be fraught with financial difficulty, conflicting rules and regulations, and a huge mass of paperwork that can seem overwhelming to inexperienced entrepreneurs. While most people choose to set up as a business as a sole trader or partnership due to the reduced costs and regulations involved, in actual fact setting up a limited company can be much more financially and mentally rewarding depending on your circumstances.

As most business experts will tell you, the most important and practical reason for registering a limited company instead of working as a sole trader is because of something called limited liability. This basically means that unless some kind of fraud has taken place, all financial responsibility stops with the company accounts and as the business owner, you will not be financially liable for the debts of the company. So if the business fails, you can only lose the total amount that you have invested, and you will not be forced into financial bankruptcy.

One more reason that is sure to seem very attractive to most people is that by setting up a limited company instead of a partnership or sole trader, you can effectively reduce the amount of tax you need to pay, just by taking advantage of certain loopholes in the system. By having a limited company, you are able to pay yourself in a combination of salary and dividends from the company profits. This means that you can choose to take a salary in the lowest PAYE tax bracket, and supplement that salary with dividend payments, which are taxed differently. The only thing you can not get away from is paying national insurance contributions, though the amounts involved are minimal.

Some larger companies follow strict codes of practice that prevent them from doing business with sole traders or partnerships for a number of reasons. Therefore by registering a limited company, you can present a much more professional representation of your company and allow the possibility of increased trade options.

Because of this improved professional representation, in all likelihood you will find it much less difficult obtaining investment from financial institutions. On top of this, you can even issue shares to shareholders and sell or transfer them if it is needed. While the issuing of shares is financially useful, it may cause you to lose some control over the business, so be sure to take advice before you go ahead.

Read On : Company Formation