Should I open a limited company?

Feb 7, 2024 | Business planning

The world of entrepreneurship is exciting – where decisions are aplenty, and each one you make feels like an essential strategic move. If you’ve been mulling over the question, “Should I open a limited company?” you’re in the right place. Let’s explore the perks and considerations of incorporation.

What can I gain from opening a limited company?

Tax benefits

Cutting to the chase, let’s talk about taxes. Opening a limited company can feel like discovering a treasure trove of tax benefits. Instead of exclusively dealing with the income tax rates sole traders and partnerships face, limited company profits are subject to corporation tax, which is often lower.

As a result, incorporation can lead to potential savings, especially when your profits start increasing.

As a company director, you can often pay yourself in a more tax-efficient way by topping up your salary with dividends – a tangible reward for your role in the business’s success.

Increased protection: limited liability

Have you ever dreamed of having a financial force field around your personal assets? Well, enter limited liability.

As a limited company, your business is a separate entity, which means your personal assets typically remain untouchable if your business faces debts or legal issues. Who doesn’t want to ensure their home and savings are safe from debt and creditors?

Increased credibility

Beyond the numbers, opening a limited company adds professionalism to your entrepreneurial reputation. That “Ltd.”‘ at the end of your business name? It boosts credibility and trust in the eyes of clients and shareholders. Big corporations often prefer to do business with limited companies, and having that stamp can open doors to opportunities you otherwise couldn’t have taken.

Let’s not forget the wider breadth of options a more complex business structure brings you. Want to add new shareholders, issue different classes of shares or transfer ownership? A limited company structure gives you a greater number of tools in your business toolbox.

Attracting investment

Operating as a limited company could bring easier access to financing. Limited companies often find it more straightforward to attract external funding or investment compared to sole traders or partnerships.

The separation of personal and business finances, along with the structured corporate framework, can make companies more appealing to investors and lenders, providing the company with greater financial leverage and growth opportunities.

Practical considerations

Now you’ve envisioned your successful limited company, let’s address the practical side.

Compared to registering as a sole trader or business partnership, setting up and maintaining a company involves more administrative finesse. From registering with Companies House to stricter reporting regulations, there’s more admin involved. However, the perks often outweigh the paperwork, especially if you’re eyeing substantial growth.

Consider the size and nature of your current business. If you’re a sole trader, the administrative demands of a limited company might seem overwhelming. In such cases, consider whether you have the time and resources to take on this greater burden. Outsourcing financial tasks to an accountant can take some of the weight off your shoulders.

Finding the business structure that aligns with your current situation and future goals is paramount.

Make an informed decision

In the grand scheme of entrepreneurial decisions, opening a limited company is an incredibly personal one. If you crave growth, financial protection, and a higher level of tax efficiency, incorporation could be your next great business move.

Always be sure to seek professional advice. At Blue Shore, we can provide tailored insights, ensuring your decision aligns with both your short-term goals and long-term journey. So ponder the question, weigh the perks, and consider the practicalities. Opening a limited company might just be the next exciting chapter in your entrepreneurial tale – cheers to navigating the business structure maze and embarking on an exciting journey.

If you’re unsure of what structure best suits your business, get in touch and let us help!

Ready to go? We’re excited to hear from you.

Let’s get started, as soon as you’re ready. We’re always up for a chat about how we can support you and your business.

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