03 Aug When To Incorporate
So you’re thinking about a limited company, but you need to know when to incorporate. You also need to know the pros and cons of doing this.
Generally a “Limited” company will end up paying less tax than a Self Employed person – depending on how much is earned and the nature of the business expenses. A very rough guide is around 3K+ of tax saved for someone on 50K per year.
Accounting costs are usually slightly higher when limited but given the tax benefits this is usually inconsequential. If you are earning more than £20,000 profit, then it’s usually a good time to start thinking about when to incorporate.
It’s now really easy to set up a limited company, and it can be done within a matter of hours online. This means there is no more waiting for paperwork to be processed, so if you are worried about a dreaded wait from Companies House, you need worry no more!
A limited company also has its own legal identity and this means third parties liaise with the ‘company’ rather than just the directors. It also means the only way the company will cease is if it is liquidated or formally wound up. It can also help employees feel more security because the business is perceived as being structurally safer.
Furthermore, many suppliers and customers will not deal with a business that is not limited. Therefore being a limited company can help build strong relationships with partners and other companies, and also allows you to show you have strong and effective management processes in place.
There are also tax benefits when becoming a limited company. As a sole trader and partners in a partnership, you pay income tax. However, if you are a limited company you pay corporation tax. As a director, you can mix a basic salary with dividends, and if structured correctly, this means the company doesn’t have to pay national insurance.
Sound like going limited could benefit your company? Pop in for a free, no obligation chat to find out more.
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