7 of the Best Reasons to Register a Limited Company (UK)
From managing your tax to attracting outside investment, there are plenty of good reasons to register a limited company. And in this article we introduce you to our top 7.
1. Managing your tax
Limited companies pay corporation tax which is lower than the income tax paid by sole traders and partnerships.
As a director of a limited company, you can also take money from the company as dividends rather than a salary, which can be more tax efficient. A salary is subject to employee and employer National Insurance contributions, and you don’t have to pay this if you take a dividend.
What’s more, a limited company is able to claim more in allowable expenses and reliefs than a sole trader or a partnership. There are tax deductible costs which you can offset against a company’s profits, meaning you get to keep more of your money.
2. Protect Your Personal Assets
Many new businesses end up trading at a loss and need to borrow money from banks or in the form of stock on credit from suppliers. If the business can’t pay the money back it will be wound up and all the assets sold to pay back the creditors.
But, when you register a limited company, your personal assets, such as your house and car, be protected. That’s because limited companies are separate entities in the eyes of the law.
3. Attract Outside Investment
If you have a solid business plan, the decision to register a limited company could attract investors keen for a share of the profits.
As the company director, you have control over how you allocate shares and what influence the shareholders will have on how the company’s run. It’s an attractive option if you need an immediate injection of funds and business expertise.
4. Gain Exclusive Rights to Your Company Name
When you register a limited company, the name of your business is placed on the public register held by Companies House. That means it’s yours for as long as the company remains in existence.
5. Polish Your Reputation
The decision to register a limited company (UK) demonstrates that your business is going to stick around. This should mean that suppliers will be more willing to extend you credit.
6. Build for the Future
If your limited company is funded by shareholder capital, you will be in a better position to plan for the long term than if you had sought loans from a bank. While shareholders accept that they might not see a return on their investment in the short term, a bank will be less patient.
7. Become a Serial Entrepreneur
Are you full of business ideas? Then why not register a limited company and sell it on when you get an attractive offer? This could be just your first company of many.
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What is a company formation agent?
Formation agents perform company registrations in partnership with Companies House. We’re one of the largest, and also the cheapest. We don’t just get your company registered then leave you to it – we use our experience to help you start your business properly. There are plenty of reasons to use a formation agent rather than go directly to Companies House. If you ask us, though, the best thing is that we go through the whole process with you, and get your application submitted securely online. We provide expert advice on the legal hurdles while you incorporate, and recommend good quality solutions that you might need after you’ve formed.
What’s the difference between sole trader and limited company?
Think of it this way: when you form a limited company, you put a protective shield between you and your business. Being a sole trader is the opposite – you have no protection. As a sole trader, you are responsible for any debt you might come into while you’re in business. When you register and become the director of your own limited company, you have less personal responsibility. The benefits are that you can claim back expenses, and add to your salary with dividend payments at the end of the year. For more information, see our Help Centre article about limited companies and sole traders.
How do I register a company?
Easy, we’ll do it for you. Check out our formation bundles to learn more about our different products. They start at £9.99, and go all the way up to our Super bundle. Limited company formation is a straightforward business if you’re as well-versed with the process as we are. If you’re not sure where to start, check out our company formation guides for an introduction and some insider tips.
Why The Formations Company?
We’re dedicated to British business, and love nothing more than seeing new companies flourish. 750,000 UK companies have trusted us to help them register, and we have thousands of happy customers who’ve seen how simple the formations process can be. We’re cheaper than going to Companies House directly, and cost less than most accountants. Our online application is incredibly simple, and if you’ve got all your documents handy it shouldn’t take more than 10 minutes to complete. So what are you waiting for? Start your business today.