10 Advantages of Forming a Limited Company in the UK
Although sole trading in the UK is preferred as the common business, the limited company is beneficial for doing business in the UK. With a lot of advantages of sole trading, we can’t deny the fact that the limited company for doing business is quite good. With the ease of doing business in sole trading, many people choose this way to do their business.
By simple formalities, anyone can easily do sole trading but anyone who goes for a limited company for their business can get more benefits. Because if someone has to make more effort then he will get more benefits from those efforts. The difficulties may be of different types, such as administrative formalities, more financial responsibilities, and many more official formalities. Here you know everything about Cheap UK Ltd company formation.
If anyone wants to form a company in the UK then he needs to have a company name, a registered office address in the UK, details of the company’s directors, and shareholders, and the names of people with significant control. By completing these processes, the formation of a limited company will be quite easy.
Advantages of a Limited Company In The United Kingdom
As we have seen the difference between sole trading and a limited company, now let’s see the reasons why we should form a limited company in the UK. As there are a lot of advantages of forming a limited company but we are going to round up some of them.
Tax Advantages
If we go for a limited company for doing the business we will have to pay less tax than we have to pay in the sole trading system. Your limited company will have to pay tax as per corporation tax rates that are quite less than other business formats. If you pay less tax in any form of business then it is surely good for you. If you are the director of your company, you can save tax by taking less salary from your company and by taking income through shareholders’ dividends. By adopting this process you don’t have to pay much National Insurance Contributions NIC and you can save the taxable amount. This is the splendid advantage of forming a limited company in the UK.
Company’s Entity
If you create a company then it will be completely separate from you which means the company will have its distinct entity. When a company has its entity, everything will be separate from its shareholders, such as the company’s assets, loans, company’s bank accounts, and credit agreements. You will not need to suffer any loss for any other problems. Your assets will not be bound for any loss or any other compensation.
Limited Liability
As per its name, a limited company owner has limited liabilities. This privilege is not provided in the sole trading system, where you have to be liable for all the actions, he has to pay back all the debts for his business loss. With the protection of the tag of limited liability you don’t have to pay through your resources, the company suffers all the losses. If the company gets a loss or gets insolvent, the company pays all the debts by selling its assets but you will not be liable to pay the debts.
The benefit of the Company’s Image
If you do your business in company form you will surely get benefitted. Because the image of the company is far better than a sole trader. If you want to collaborate with any famous company, they will not permit any sole trader. They would like to connect with a reputed company instead of a sole trader. A company can impact more than a sole trader because the brand value of a company is better than other business entities. So, we can say that the image of doing business under the title of the company is more beneficial than a sole trader.
Ease of finance
A limited company gets better financial services than any other business form. Many fund providers contact limited companies for funding them because of the reputation of a limited company. They provide different convenient interest rates that make it easy for company owners. The company owners have a lot of financial institutes that can fulfill their demands as per their needs.
Company’s Unique Name
This is also an advantage of adopting a company as a business entity than sole trading. In sole trading, anyone can do business with your business name. It means there is no law regarding the name of the sole trading entity. But in the UK company law, no one can use a similar name to other companies. Not only a similar name but also a name that is deemed to be the same as that company. With this advantage, you don’t have to worry about fraud done under your company’s name. Because sometimes, some people do business operations under a similar name to your business entity and you have to suffer its results.
Costing
It is often heard that the set cost of the company is very high. This is a misconception, if we follow the economical steps, we don’t need to pay the higher charges. If we see another side of these expenses, the cost compared to the company’s earnings is quite less. Nowadays we can hire online services that are working for the formation of limited companies. They prove to be cheaper than other service providers.
Easy to Sell the company
If you feel that you have to sell your company, you can do it easily by following some process. The process of selling a limited company is quite easier than any other business entity. Transferring ownership is easy for the company’s owners.
Legacy
If a company owner wants to transfer his company name to his or her family member, the process of doing this is quite simple. If someone wants retirement from the company then he can transfer his shares to other persons. All the formalities related to these steps are not so tough. A company person can plan the aftermath of his death or any other accident.
Number of shareholders
In a sole trade, a person musters all the funds to initiate a business but in the company format, you don’t have to panic about raising funds for your company. There are a lot of shareholders that raise funds for their company. They invest their money in the company and get benefits in dividend form. So, neither the profit nor the loss is entitled to a single person in the limited company format.
Conclusion
We have discussed the major benefits of having a company structure for doing business but before starting a business you should consider every aspect of that business. Some businesses are suitable for company forms and some businesses are suitable for sole traders. There are a lot of factors that affect the decision of doing the business in which form. So, we would like to recommend you take all the precautions before taking steps and we would recommend you some counselors’ advice. If you take advice and check all the facts before starting any setup, you will surely get succeed in that business.
