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Hi Beanie,
The answer to your question is, it depends! Setting up a limited company has lots of advantages and disadvantages and you need to think carefully about whether it is right for you and your business.
Advantages of setting up a limited company
1. Your company is a seperate legal entity to you and this means that financial risks are removed from you somewhat. Eg. if your company was sued or made a loss, your creditors would have no rights over your personal possessions such as your home. This is a big advantage for riskier businesses.
2. Businesses that tender for goverment contracts or for contracts with large organisations often have to become companies as large organisations prefer to trade with limited companies.
3. Some people choose to become limited as it gives the impression of a more established, bigger business to their customers.
4. In most simple cases, you pay less tax if you trade through a limited company and you pay it later, meaning you hold on to your cash for longer.
Disadvantages
1. There is definitely increased administration and responsibilites if you set up your own company. You would usually be a director and would have to fill in a self assessment tax form each year. You would also have to file accounts with companies house and complete companies house returns every year. You would have to register for corporation tax and work out your corporation tax liability each year. Basically you would probably need to hire an Accountant unless you can prepare accounts yourself.
If you have any more specific questions about whether this would be appropriate for your business, please post on the forum and I will try and help. Alternatively feel free to email me at mary@thehubbusiness.com |
