Are you thinking about taking your business to the next level by going limited?
Going limited is a big decision, that can have significant implications for your finances, legal responsibilities, and overall business structure.
In this blog, we’ll delve into the advantages and disadvantages of forming a limited company to help you make an informed choice as to whether it’s the right path for you.
What is a limited company?
A limited company is a type of business structure where the company’s liability is limited to its assets. This means that the company’s finances are separate from the personal finances of its owners (shareholders). It is also a distinct legal entity from its owners – it can enter into contracts, own property, and be sued in its own name.
Advantages of Going Limited
Limited Liability: This is the biggest perk. If your business gets into any financial difficulties, your personal assets are protected. Creditors can only claim against the company’s assets.
Tax Benefits: Depending on your circumstances, you may benefit from corporation tax rates compared to income tax. However, it’s essential to consult with an accountant to assess your specific situation.
Enhanced Credibility: A limited company often appears more professional and established to clients and potential investors.
Raising Capital: Attracting investors can be easier as they can invest in shares rather than becoming a business partner.
Succession Planning: It’s easier to transfer ownership of a limited company through shares.
Disadvantages of Going Limited
Increased Costs: Setting up and running a limited company involves additional costs, including company registration fees, accounting, and legal expenses.
Administrative Burden: You’ll need to comply with more regulations, such as filing annual accounts and returns.
Loss of Control: While you’re initially in control, as the company grows, you may need to share decision-making with shareholders or directors.
Tax Implications: As mentioned, tax can be more complex and may not always be beneficial compared to other business structures.
Public Records: Information about your company, including financial performance, will be publicly available.
When Should You Consider Going Limited?
Personal Asset Protection: If you’re in a high-risk industry or want to protect your personal assets.
Growth Plans: If you’re planning to expand and need to raise capital.
Succession Planning: If you’re considering passing the business on to family or employees.
Deciding whether to take your business limited is a significant decision that shouldn’t be taken lightly. It’s essential to carefully weigh the pros and cons based on your specific circumstances – consulting with an accountant is a good idea as they can offer valuable insights on whether it would be beneficial for you and your business.
We know that tax and accountancy can be confusing. That’s why there is always a member of the team on hand to provide you with simple, clear explanations at every point. Our aim is not just to support you on your journey to success, but to empower, inspire and give you the confidence that you can reach your goals.
Get in touch with us and start your journey with Turas Accountants today.