If you want to form a limited company or convert your current business to a limited one, you can reap in a bundle of benefits. First of all, in such a company, the company’s officers and shareholders have always a restricted liability bestowed upon them. In a non-limited company or in conducting business as a sole trader, personal assets are at risk in the event of failure of the business. This is not the case with such company.

In a limited company, directors’ or shareholders’ personal assets are not at risk in the event of a winding up or receivership as long as the business is operated legally and within the terms of the Companies Act. To be able to keep the personal assets above risk is certainly a big benefit, particularly at a time when business failure has become one of the commonest things.

Saving on tax is the second important benefit one can avail if he forms a limited company in the UK. The first £10,000 of such company’s profits is tax free which is not the case for sole traders and partnerships. So, the prospective businessman gets a good chance of saving reasonable amount on tax. this type of company also helps you in reducing your tax liability still further. This is because of the fact that company profits may be distributed as dividends to shareholders and as of now, National Insurance is not applicable to dividend payments.

After you form a limited company, you become trustworthy in the eyes of suppliers and customers. As a matter of fact, larger organisations in particular prefer not to deal with non-limited businesses. They feel a sense of confidence while dealing with this type of companies. Then costs associated with managing and operating a such company are less than non-limited businesses. Finally, you have no obligation to initiate trading within any set time period after its incorporation. If you form a limited company [http://www.companieshouseonline.com/content/category/7/80/54], you can enjoy all these advantages.

About the Author: The Author is an experienced writer presently writing on topic like offshore company formation and company formation agent to make business services successful in the UK.

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By forming a company in a foreign land, one can reap benefits that he may not be able to avail in his own country. This is the reason why more and more people are opening companies in foreign countries. Forming an offshore company has also become quite easy. If you are to start a company in the UK, all you have to do is to comply with the rules and regulations laid down by the Companies House.

UK limited company formation requires four documents to be submitted to the Companies house. All these four documents are concerned with various necessities of company formation in the UK. The process starts with the naming of the company and ends with its liability. In between, it contains the location of the registered office, the purpose of conducting the business and the nature of business etc.

Regarding the naming of the company, Companies House says that it should not be similar to the name of a company that is already registered with it. So, in order to start with the process of UK limited company formation, one should decide the name of the company. The most important thing to be taken care of here is that the word ‘limited’ should be there in the name. It will suffice if the word is written in contracted form.

Besides this, UK limited company formation [http://www.companieshouseonline.com/content/category/7/80/54] will necessitate a registered office within given jurisdiction. If the company is in England, the office should be somewhere there. In case, the company is to run in Wales or in Scotland, the registered office should be within the geographical location of these two places. After this office, it is the turn of the liability of the company and the purpose of running the business: these two facts will have to be declared by the person who is dealing with UK limited company formation process.

About the Author: The Author is an experienced writer presently writing on topic like online company formation for taking business services to form a limited company [http://www.companieshouseonline.com/content/category/7/80/54] in the UK.

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Tax shouldn’t be taxing, as the slogan goes, but for most contractors and freelancers it usually is. Choosing the right business model to suit your working life is important, but needs careful consideration. The tax system in the UK is under review – and the coalition government has made it clear that the tax system for small businesses needs streamlining. Historically many self-employed contractors have made use of the Limited company to maximise their income and lessen the impact of tax. However, IR35 legislation sought to close some of the loopholes in the tax system, but has been widely criticised and may face suspension in the near future. Alternatives to forming a limited company include working as a sole trader or using the services of an umbrella company. Making the decision between these models is never simple and with changes in the air freelancers remain in a difficult position.

Disguised employees

In the past forming a limited company made a lot of sense. The reason that this was ‘tax effective’ – the almost invisible line between effective and avoidance is the problem here – was that contractors did not have to take all income as salary, but split it between salary and dividends; the latter having less tax liability. This type of efficiency was exactly what IR35 sought to remove. Many contractors work as ‘disguised employees’ – working for one client as if they were employed by that client alone. For clients this system gave flexibility in terms of staffing – while for the contractor running their own limited company meant that what was effectively ‘salary’ could be re-organised into salary and dividend payments.

Suitability of Limited companies

Forming a limited company works best for contractors who fall outside of the IR35 regulations. Those who work for a range of clients and cannot be viewed as ‘employees’ of any single employer can still take advantage of forming a limited company. If you do fall into this category you can genuinely take advantage of the benefits of splitting income into salary and dividend payments. One small caveat – HMRC are fonder of the word ‘probably’ than lager marketing teams – so always take advice from an accountant.

Umbrella companies

If your working pattern means that you are forced to take all income as salary – i.e. you fall within the IR35 regulations – normally the most effective alternative to forming a limited company is to use the services of an umbrella company. These effectively employ the contractor and run PAYE services as any standard company would. The contractor instructs the umbrella company to invoice the client or agency they work for and tax and NI contributions are then dealt with by the umbrella company. This can make the art of tax far less taxing for individual contractors or freelancers whose main source of income is with one single company.

Whatever your circumstances, forming a limited company or using an umbrella company can make self-employment far more straightforward. Before making the decision take advice and consider the best options for your circumstances and your business.

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Before your decide whether your business should be a limited company or not you should think about the advantages and disadvantages that can come with this sort of set up.

A limited company is a separate legal entity and a primary benefit is Limited Liability. Basically, this means that you would normally avoid being personally responsible for the company’s financial obligations. However, this can be somewhat misleading as your main creditor is likely to be a bank and they normally require directors be personal guarantors should the company fail.

There is also currently a real tax benefit to be achieved from incorporating as the tax system for companies is very different to that for individuals. For businesses with profits of £10,000 to £15,000 the tax saving could be in the region of £300 to £500. However, tax systems and legislation change and the government is always looking at measures to put a stop to “income shifting” (allocating income purely on the basis of minimising the tax bill rather than the individual contribution to the business).

Other potential benefits of incorporating (even for one-person operations) are that once the Company name is registered then it is immediately protected as Companies House will not allow the registration of another identical Company name. You should remember though, that Domain Name Registration on the Internet is not automatically protected as these names are not registered in the same way and are not dealt with by Companies House.

Companies who become Limited can use this as part of their corporate identity. The Ltd in a company name can give the sense of image, stability, sophistication, credibility, and permanence and may help when trying to secure large contracts.

When Limited Companies are raising capital they can issue stock to investors to raise capital which may be more advantageous than borrowing and making interest payments. A corporation can also issue and sell additional stock. This can take away some of the reliance on the banks or other money lenders.

The annual compliance requirements for a company in terms of administration and accounting tend to result in costs being higher with a Limited Company than for a sole trader or partnership. Annual accounts need to be prepared in a format dictated by the Companies Act and, in certain circumstances; the accounts need to be audited by a registered auditor. This may increase the professional fees but these should be more than offset by the tax savings being made.

With regards to tax, one benefit from operating as a Limited Company is the owner of a business can choose to pay themselves a lower wage and take money out of the company as dividends, providing they are a shareholder and the company has sufficient retained profits. This can be advantageous as there is currently no National Insurance on dividends.

As an employee of the company you would still need to pay tax and National Insurance on any salary you are paid via PAYE. You would also need to complete a tax return if you are a Company Director.

The company will need to pay Corporation tax on the company’s profits. The rules for Corporation tax are more complicated but essentially they are based on the company’s income, less its costs, allowances, reliefs, deductions etc. The rates vary depending upon the profits but in 2011/2012 corporation tax is paid at a rate of 20% when profits are less than £300,000.

It’s very important that you declare your Limited status to HMRC and that you file your company’s returns on time; particularly as Companies House and HMRC impose stiff penalties for late returns and payments.

These are just a few of the things you need to consider when deciding if you should have a limited company but the best advice is to get professional advice. I’ve researched this article using an Online Accountant as a knowledge resource. They will talk you through the options and help you set up your Limited Company; if that’s the route you choose to take.

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