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Benefits of becoming a limited company

Benefits of becoming a limited company
Thursday, December 27, 2018

The day has come for you to form your own company. But do you start up as a sole trader or as the director and shareholder of your very own limited company?

In nearly all cases where the turnover of a business is higher than £30,000 and there are few operating costs, a limited company is the better way to go.

There are a number of benefits to be gained by running your business as a Limited Company. One of the main questions at the forefront your mind is likely to be which company structure is going to be the more tax efficient? It is likely that you will pay less corporation tax and personal tax combined as a director of a limited company than you will pay in personal tax operating as a sole trader.

The profits of a limited company are subject to UK corporation tax. The government has indicated that there will be a reduction in the percentage of UK corporation tax of 2% from the tax year starting April 2020, taking it to 17%.

Savings can be made on the amount of National Insurance Contributions you have to pay if you choose to take a small salary and draw most of your income in the form of dividends. This is because limited company dividends are taxed separately and not subject to National Insurance Contributions.

In addition to this, a limited company can retain profits and distribute them as dividends in future tax years if necessary. This means that the directors can delay paying income tax on dividends during a good year and defer paying them until the following year as a way of receiving tax efficient income.

As the name suggests, limited company status gives you the reassurance of limited liability. This means that you will not be personally liable for any financial losses made by your business as long as no fraud has taken place. If you have chosen to be self-employed, you would not enjoy such protection from financial claims if things go wrong.

In some circumstances, it may be easier to secure business finance if you are trading as a Limited Company rather than a sole trader.

A major consideration for everyone in employment is how to provide for their retirement by way of a pension. A limited company can fund its employees’ pensions as a deductible business expense. In these circumstances, this offers a significant tax advantage over those who are running their business as a sole trader.

There are legal requirements that must be adhered to when forming a limited company. For example,

  • The company must be registered at Companies House.
  • The company’s annual accounts must be filed at Companies House.
  • The company must complete and update a confirmation statement once a year

In addition to filing company accounts with Companies House, they must also be filed with HMRC for corporation tax purposes. These are just some of the many responsibilities that the director of a limited company must undertake. However your accountant will be able to advise you on these matters.

If you are currently operating as a sole trader and wish to take all the assets and goodwill into a limited company, it’s possible to do so. Let us know what you’d like to achieve and call the Panthera team for help.

For further information on forming a limited company, contact us on 01235 768 561 or email enquiries@pantheraaccounting.com.

What our clients say

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Pete Dungey

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We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

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The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

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We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
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Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
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I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

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