Should you incorporate your business?

When thinking of incorporating your business, the following points should be considered… 

Protection of company wrapper 

A limited company is a separate legal entity, which in turn protects your personal assets from business debts and liabilities. This means your personal finances remain secure if the business faces financial difficulties. 

Tax savings 

There are tax advantages of trading as a limited company. Limited companies pay Corporation Tax on trading profits at a maximum rate of 25%; for smaller companies (profits being £50,000), this can be 19%. A further point to consider is dividends distributed to shareholders; these are not subject to National Insurance, potentially providing a more tax-efficient method of remuneration. 

Responsibilities of running a limited company 

There may be some additional administration tasks and costs, for example: 

• Compliance: registering with Companies House, filing annual accounts, and submitting confirmation statements are mandatory
• Record Keeping: maintaining detailed financial records is essential to meet legal obligations
• Costs: expenses including registration fees and potential professional services for compliance.  

Professional Image and Credibility 

By trading through a limited company structure this can enhance your business' credibility, potentially attracting more clients and opportunities.  

Business Growth and Investment 

Incorporating into a company allows for business expansion by: 

• Equity Sharing: issuing shares to raise capital from potential investors 
• Succession Planning: multiple ownership transfer options, ensuring continuity of the business.

To summarise

Incorporating your business offers benefits like liability security and potential tax savings, but comes with additional administrative responsibilities. It's important to review your individual circumstances, financial goals and the current economic climate. 

If you need further advice, or you're a small business and need accounting or tax advice and support, please give our friendly and knowledgeable team a call on 01380 723692 or email us here.