Before you set up a Limited Company, you should know what Limited Company is all about. Until you aren’t aware about all the requirements and processes, don’t set up a one as doing so requires a major commitment from your side.
So, what is a Limited company? Well, it is legal structure for a business in which the liability of each shareholder is limited to their individual investment. It is registered at Companies House and governed by it’s own articles of association.
Take a look at these pros and cons of a Limited Company which will give you more insight on this subject.
Overview of a Pros & Cons Limited Company
Pros
Credibility
Your customers will have confidence in your business. This will only increase the credibility of your business and attract more customers.
Control
As a Limited Company owner, you do not have to worry about risking your money with any third party or Umbrella Company. This means you will have a total control on your financial matters.
Higher take home pay
When you work through your Limited Company, you can take 75-80% of your contract which is more compared to any other options.
Lower personal financial risk
Being a shareholder, you are not held personally liable for the debts of a Limited Company. Thus, due to the structure between you and company, you will be protected from any personal financial losses.
Flat rate VAT scheme
As a Limited Company, you are entitled to join Flat Rate VAT scheme. And, what‘s more is such scheme can generate thousands of pounds of extra profit a year.
Tax planning
Various tax planning opportunities can be tailored to your circumstances for delivering significant tax savings which only increases your finance.
Cons
Administration
There is a greater statutory obligation involved. It includes submission of Annual Accounts, Corporation Tax Returns and VAT Returns.
Costs
If you have a short term contract and decide go back to your permanent employment, Limited Company can be a costly business. That is because you are required to submit the end of year accounts before going back to your old employment.
Accounts
You need to file your accounts, company tax and corporation tax with HM Revenue & Customs (HMRC) every year. Accountants can be a great help in this department. So, consider hiring a one.
Directorship
Directors of Limited Companies hold obligations under the Companies Act 2006.
IR35
To show you are genuinely self-employed, you are required to have an IR35 friendly contract. This means you need to have matching working practices with the contract itself.
If you become a Limited Company owner, you will be both a director and a shareholder. This means everything about your business activities will depend on you. Thus, it is important to consider these advantages and disadvantages before starting such company.
