Pros and Cons of Operating as a Limited Company
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Advantages:
- Tax efficiency
- Limited liability protection
- Easier to get investment
- More opportunities to borrow money
- More tax relief
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Disadvantages:
- Admin burden of annual accounts
- Less privacy
- Costs involved in set up
Is it Worth Becoming a Ltd Company?
Running your business as a limited company can enable you to pay less personal tax than a sole trader, potentially allowing you to take home more of your earnings. A limited company provides a financial firewall between the company and its owners, protecting personal assets in case of business failure.
According to recent statistics, there are now 4.2 million limited companies in the UK, signifying a significant increase. It is essential to examine the pros and cons to determine if setting up a limited company would be beneficial for you.
As a general rule, reaching a threshold of $50k may make it worthwhile to consider transitioning to a limited company, but consulting with a tax planner is necessary for a definitive answer.