Starting a business is one of the most exciting career options. One of the advantages of setting up a limited company is that you get to be the boss. You get to work as per your preference. The benefits of starting a business can be numerous.
When starting a business, you need to be aware of the benefits. Some main benefits include better take-home pay, tax planning, and more. If you're planning to set up the business, you need to know whether or not you're ready. However, deciding the structure of your business can be more difficult. Most entrepreneurs prefer starting a limited company because of the numerous benefits it has to offer.
A limited company in the UK refers to a company that is limited by guarantee or limited by shares. The limited company usually has a separate legal personality that ensures they have specific rights and obligations.
The company's obligation, however, will not be extended to the founders. The company's liability can be an essential factor to consider. Since it is a separate entity, any challenges or losses that the business suffers will not directly affect the owner.
Once you set up a limited company, it can be more beneficial than usual. Of all the business structures, the limited company can be more beneficial. Some of the common benefits of starting a limited company include the following:
Setting up a limited company is easy and can be quickly started. The best part is you can get the entire process done online. Nowadays, you don't have to wait weeks or hours to start the paperwork from Companies House. You can start a limited company within a few weeks. You will likely get the approval in 5 minutes if all your paperwork is correct.
Starting a limited company can be cheap. It’s advisable to know the cost and expenses against the corporation tax. The introduction of the Companies Act 2006 helped in running the limited company easily. The government will continue to examine ways to provide well-run companies flexibility for running the business successfully.
Starting a limited company ensures that the business is committed to responsible management. As a result, both supplier and customer get the flexibility of running the business successfully. Having the status of having a limited company ensures that your business is credible.
When you want to do business with larger organisations, they will only do it if you are a limited company. Setting up the limited company will provide a wide range of opportunities to people that won't be available otherwise. Moreover, these limited companies get extra accounting and reporting efforts that act as a credible opportunity.
The sole traders and partnership firms usually do not benefit from uniqueness. Once you register the limited company with Companies House, the name that you register for the business will be protected. Your competitors and others won't be able to use the name or any similar name as that of your business.
Sole traders and partnerships need to raise capital using their own resources. However, these limited companies can easily get the funds by providing new shares. The existing shareholders will get new shares or from new investors. However, the company will be able to provide shares to the respective individuals within the company and not to the public. Only the public limited company can only offer their shares to the public.
Creating one or more shares can play an important role in providing flexibility. You can tailor the rights for voting and getting control of the company. Furthermore, you will also receive dividends and extract capital when the company stops running. When the company is established, the new shareholders can also be introduced. You must also include pre-emption rights for protecting the rights of the existing shareholder.
There are various tax advantage schemes, such as Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS). These schemes are aimed at raising capital for companies. Apart from these, other grant funding options are available for businesses to set up the companies.
If the limited company is planning to borrow money from the bank, it may be able to get it at a lower interest rate. Moreover, you may also be able to get the loan without any approval from the directors. On the other hand, the sole traders will need approval from various authorities to secure the grants.
Setting up a limited company in the UK can provide numerous tax benefits to its owners. Firstly, limited companies pay Corporation Tax on their profits, which is currently 19%. Secondly, directors and employees can receive a tax-free salary up to the National Insurance Contribution threshold. Thirdly, limited companies can claim tax relief on allowable expenses such as office rent, equipment, and training. Furthermore, limited companies can also use Capital Allowances to claim tax relief on assets such as machinery and vehicles.
Setting up a limited company in the UK can significantly enhance the credibility and reputation of a business. Limited companies are viewed as more professional and trustworthy compared to sole traders or partnerships. This is because limited companies are registered with Companies House and have a distinct legal identity separate from their owners. This can increase confidence in the business among customers, suppliers, and lenders. Furthermore, limited companies must maintain accurate records and submit annual financial statements, demonstrating transparency and accountability. Additionally, having limited company status can also provide a sense of prestige, demonstrating the success and stability of the business.
Starting a limited company in the UK is a smart move for any growing business looking to take the next step. With its numerous tax benefits, strengthened credibility and reputation, and legal protection for its owners, a limited company provides the perfect foundation for long-term success. Imagine the peace of mind you'll have knowing that your assets are protected and the increased confidence you'll have in presenting your business to the world. By choosing to incorporate in the UK, you'll be joining the ranks of some of the world's most successful and innovative companies.
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