Should I go Limited?

Should I go Limited? This is the big question you should ask yourself when you are in business.

Is yours a hobby business, or is it something that you intend to grow into something substantial?

A sensible structure for a hobby business would be to set up as a sole trader, but if you are confident that your business will become or already is something more substantial, and you legally want to pay as little tax as possible, then you should consider a Limited Company.

A Limited Company is a popular business structure in the UK. A Limited Company has its own legal identity, meaning you and your business are not the same, even though you might be the only person involved in the company. Likewise all the money earned by the company does not all belong to you.

The big advantage of running your business through a Limited Company is that you get the protection of limited liability, thus generally (unless wrongdoings are found) your liability is limited to the capital that you put into the business.

As a sole trader, all your personal assets are at risk if your business goes wrong.

You generally pay less tax as a company. A company pays Corporation Tax on its profits, this tends to be less than the tax and national insurance you would pay as a sole trader (talk to your accountant about this as there are some situation where this is not the case).

The main disadvantage of using a Limited Company, is the extra paperwork that needs to be completed and filed at companies house, plus a lack of privacy as all these documents are now public records and available on the Companies House website for a £1 fee.

Your accountant will prepare these documents for you, but they will charge you more than if you were a sole trader, as there is substantially more work to do, but the tax savings are normally well worth it.

Freelancer Accounting is a specialist provider of fixed fee accountancy services to freelancers and contractors in London and the South East of England.

We understand that tax is complicated and offer you face to face meetings at one of our office locations convenient to you.

You have your own dedicated accountant as a point of contact.

We are accredited by the Professional Contractors Group (PCG) and are an ACCA Practice, so you never have to worry about you tax and accounting affairs again.

If you are thinking of contracting or an existing contractor with questions and would like further advice, please do not hesitate to call your local FreelancerAccounting office on 0800 1357157 or email martyn@freelanceraccounting.com