Setting Up a Limittrd Company OR Staying a Sole Trader

SETTING UP OR STAYING A LIMITED A SOLE COMPANY TRADER You might wonder after all setting up a limited company is likely to involve more administration and higher costs than if you were a humble sole trader. Potentially, you risk personal bankruptcy If the debt Is Essentially, the answer as to whether you set up a private limited company concerns personal financial llabllity. considerable and you can't pay It. Setting up a limited company offers protection against this If you're a sole trader and your business fails, you're personally liable for its debts. WHY SET UP A LIMITED COMPANY? A limited company is a separate legal entity and as such, legally, it's responsible for its own actions. Providing you don't trade recklessly or fraudulently, as a director of a limited company your risk of loss is restricted to money you've invested in the company. The finances of private X limited companies are entirely separate from those of its owner(s). However, you're liable for bank loans if you provide personal guarantees for that limited company. Private limited companies can have one or more O shareholders, but shares cannot be sold publicly. HOW DO I SET UP A LIMITED COMPANY? You will have to send a memorandum of association, articles of associatilon and a completed IN01 form to Companles All UK limited companies must register with Companies House. The registration process for limited companies is known as incorporation. HOuse. 3 2 Once a year you will need to In order to draw up 'true send statutory accounts to both HMRC and Companies House. It Is best to seek help froma professional advisor who will be and fair' annual accounts you need to keep a full record of all business income and expenditure. aware of Generally Accepted Accounting Principles (GAAP). BENEFITS OF STARTING A LIMITED COMPANY III 2 3 DISTINCT ENTITY ТAХ LIMITED LIABILITY The main advantage of running your business as a limited company is that you are likely to pay less personal If you run a limited company, you are protected in case things go wrong. Assuming no fraud has taken place, you will not be personally liable for any financial losses made by your limited company. Everything from the company bank account, to ownership of assets and involvement in tenders and contracts is purely company business and separate from the interests of tax than a sole trader is. the company's shareholders. 6 PROFESSIONAL FUNDING NAMING If you are doing business with larger companies, you may find that they prefer to deal only with limited companies rather than sole traders or partnerships. A limited company is a distinct entity from its owners it may be a little easier for a company to secure business finance than it is for their sole trader counterparts. Once you register your company with Companies House, your company name is protected by law. No one else can use the same name as you, or anything deemed to be too similar. SHAREHOLDERS COSTS PENSIONS A limited company can issue People generally assume that the start-up and running costs are significantly lower for a sole trader as opposed to limited company. However, you can forma limited company from as little as £15 that is if you perform all company administration paperwork yourself. A limited company can fund its employees executive pensions as a legitimate business expense. This can offer a tax advantag those who are running their business as self-employed. various classes of shares. This means you can easily sell stakes in the company, or transfer ownership of shares. a ove 10 SUCCESSION If a shareholder wishes to retire, sell his shareholding, or dies, it is far easier to transfer ownership of a limited company than a non-registered business structure. YOUR References: • https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/366978 limited-company.pdf • http://www.startupdonut.co.uk/startup/set-up-a-business/setting-up-a-limited-company • http://www.bytestart.co.uk/limited-company-advantages.html COMPANY FORMATIONS www.yourcompanyformations.co.uk