What are the benefits of becoming a limited company?
Becoming a limited company has many advantages:
- Risk avoidance. Limited financial liability protects the business owners.
- Reduced tax bills. Depending on your circumstances, dividend payments can be more tax efficient than normal PAYE.
- Prestige and credibility. Some of your customers will prefer to do business with a company and not a sole trader.
- Defined ownership. Issuing shares to represent percentage of ownership makes it clear who is entitled to what percentage of profits
- Protection of your business name. Competitors cannot register an identical company name at Companies House
In additon being a limited company can help to avoid common problems associated with unlimited partnerships and sole trader status. You can find more information on the benefits and limitations of running your business as a limited company on our website.
It is important to understand that a limited company is the correct business format for many start-ups yet others may be more suited to being a sole trader, LLP or other type of business structure. If you are not sure which type of legal structure to choose we recommend you seek advice from an accountant that can discuss your personal circumstances.