One of the biggest advantages for many is that running your business as a limited company can enable you to pay less personal tax than a sole trader. This could therefore help you to take home more of your earnings. Since a limited company provides a firewall between the finances of the company and its owners, third parties enter into contracts with the corporate entity rather than with individual directors and shareholders.
According to the latest statistics, there are now 4.2 million limited companies in the UK, up from 2.6 million in 2010. In this article we will take a look at the pros and cons of setting up a limited company rather than being a sole trader. This will allow us to look at whether you would benefit from doing so.
- Tax efficiency
- Limited liability protection
- Easier to get investment
- More tax relief
Disadvantages of Running a Limited Company
- Admin burden of annual accounts
- Less privacy
- Costs involved in set up
Considerations for Setting Up a Limited Company
As a general rule of thumb, $50k is on the threshold of where it does start to become worth it. It is recommended to speak to a tax planner to get a definite answer on whether you should become a limited company.