Five reasons why you should become a limited company

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Many people think that the new dividend tax is now a disadvantage.

However we have a five why you should become a limited company below:

  • A limited company stops yourself from going bankrupt. The word ‘limited’ means limited liability which really means if your business goes bust, it is the company that goes bust and not you.

 

  • A limited company gives you commercial credibility. If you are just starting a business you are most likely starting small.  Becoming a limited company makes you look bigger, more professional and more serious. In some cases, there are some people that won’t do business with you if you’re not a limited company.

 

  • Being a limited company means you stop paying payments on account. If you are a self-employed individual, you will be paying payments on accounts which essentially is paying tax up front which is based on your last years profits.  This is not good from a cash flow point of view, it means you are paying out tax on money you may not have earned!If you’re a limited company, you will get rid of payments on accounts completely.  Depending on the timing of when you become a limited company, you may even get out of paying a payment on account that is due already.

 

  • Certain costs are easier to claim through a limited company, for example travel and subsistence than they are for self-employed.

 

  • A limited company gives you the options to plan and save your tax, being self-employed gives you no options. Whatever you earn as a self-employed individual, you will be directly taxed.  There isn’t an option of planning or saving your tax.  A limited company gives you plenty of options to plan and save your tax.
 
 
 

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