The Benefits of Starting a Limited Company

If you are thinking of starting a business, or are already self-employed, then you have probably considered forming a limited company. Here are the main benefits:

• It is easier to bring other investors into the business by selling shares
• There is a clear exit from the business by being able to sell your shares in the company
• A company will also provide you with the benefits of limited liability, protecting your personal assets
• There are potential financial benefits by taking a basic salary and then any remaining drawings as dividends
• You can leave money in the company until you need it and only withdraw funds when you are able to do so at a lower tax rate
• You may also be able to involve family members as shareholders and utilise their lower tax rate

But there are pitfalls for the unwary. There are legal responsibilities and you need to be sure that you understand these. If you treat the company as your personal bank account you are almost certainly going to find yourself in difficulties. And if you miss deadlines set by Companies House or HMRC, there will be serious consequences. So you need to weigh up the pros and cons carefully.
You also need to have the profitability that will realise the tax gains and you should be aware that tax rules change regularly. So form a company because there is a clear business case for doing so, rather than for a short-term tax gain. If you have good advice and set up proper systems, you ought to be able to fulfil your legal obligations routinely and concentrate on making money from your business.