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There are many benefits to setting up as a Limited company. If you’re working as a contractor or sole-trader, it could be in your best interests to take advantage of what a Limited company has to offer.
If you’re currently set up as a freelancer, sole trader or partnership, it will depend on the type of clients that you work with and the industry that you’re in whether Limited company status is best (and we advise on this if you’re not sure) but if you’re looking to be in it for the long term and to see longevity and reach bigger clients and companies, going Limited will be the best option.
Here are 10 benefits of becoming a Limited Company:
1) Running a Limited company will give you better control and management over your finances.
2) If things go wrong, you will not be personally liable for the financial losses made by the company.
3) Personal assets are not at risk. If your Limited company falls into debt, this will not affect your personal assets.
4) It is easier to transfer the company ownership to another person if set up as a Limited company. Shares can also be transferred to new ownership too.
5) By choosing to receive a portion of your income through dividends, you can save on national insurance contribution costs which will enable you to be responsible for your tax liability.
6) By running as a Limited company, you can potentially see a take-home pay of between 81-86% of your earnings, which is higher than a sole trader.
7) There is more flexibility in the way you manage expenses, being allowed to buy tools for the trade to increase profitability or claiming expenses for travel or eating while you’re out on business for example.
8) The option to take out a director’s loan from your business. HMRC require that this is paid back within 9 months, but you can borrow up to £10,000 interest free.
9) Trading as a Limited company often comes across as more professional and gives you better opportunities to do business with larger clients or organisations.
10) You’ll be entitled to the Flat Rate VAT scheme which can generate extra profit per year.
Setting up a Limited company Is a quick process and Companies House will usually process your application with 24 hours. It Is beneficial for an accountant to process the application for you, but if you do decide to do it yourself be sure not to make the common mistakes that we see many small business owners make.
Here at 2020 Accountancy we offer a specialised accountancy service to Limited companies. That means that we are fully competent and up to date with all legislation employment law that you will need to manage your business. We have years of experience working with both contractors and Limited companies and have walked many contractors through the process of setting up as a Limited company. If you’re looking for an accountant that knows and understands your business, we’d love to hear from you!