Advantages of a Limited Company
- If a limited company should
fail there is less risk to personal and
family assets than there is with sole traders or partnerships.
- These days a company only
needs one shareholder who can also be a director, and a company
secretary who does not need to be a director.
- Companies with a turnover
below £5.6 Million do not need an audit making the cost of year end accounts much closer to those of a Sole
Trader.
- Shareholder Directors can select a package of Low Salary and Higher Dividends aimed at reducing Tax and National Insurance both for the individual
and the company. Savings can easily be over £1,000 per year if sole trader profits are as low as £20,000, and over £3,200
per year compared to a sole trader with £45,000 profit.
- Shareholdings
can be split between family members to spread the dividends and
reduce higher rate tax liability (or eliminate it all
together).
- Companies with profits below £300,000 pay tax at just
21% (20% from April 2011), rather than basic rate of 20% or higher rate of 40% personal
tax and Self Employed National Insurance of 8%.
- Limited Companies often
have a higher marketing profile than other
businesses.
- Limited Companies can be easier to sell than Sole Traders or Partnerships.
- There are a
few disadvantages, but as long as the company does not trade
whilst insolvent and there is no fraud there is very little risk to
the directors.
- There is a higher
paperwork burden with a company but the advantages outweigh the
disadvantages.
- We can form
your Limited Company from as little as £150.00 + VAT which
includes lots of additional tax saving advice.
- Also see our Tax Tips page for Company Directors.
