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The advantages and disadvantages of a limited company

Taking calculated risks is part and parcel of business operations, no matter whether you’re a sole trader or a limited company. A limited company in the UK is an incorporation whose liability is, usually, limited by shares, and is the most common form of a privately held company.

It’s a company structure that allows an individual to create a business as a separate entity. Limited companies have their own legal personality, which separate it from the people who make up the company itself, meaning that third parties enter into contracts with the corporate entity rather than individual directors and shareholders. What this means is, if you run a limited company as a director, you have a limited liability for its debts, normally limited to the notional value of your shareholding. If the company fails, you would not be personally responsible for its financial losses. There are exceptions to this general rule should you operate or do anything illegal as a director, in the name of the company.

Confidence is key when it comes to business, and a limited company adds a layer of professionalism, which can in turn instil confidence in your business. Large corporations and organisations in the financial sector prefer to work exclusively with limited companies, which can present new business opportunities which may not have existed otherwise.

“A common misconception is that incorporating a limited company is that company setup involves navigating a bureaucratic obstacle course which can take time and  cost a significant amount at the same time. At Turner Little, we offer a number of solutions that can take a fraction of the time,” says James Turner, Director at Company Formation Specialists, Turner Little.

“Some of the greatest advantages of a limited company structure are tax efficiency when compared to sole traders, limited liability, the ability to invest pre-tax into company pensions and having the ability to maximise on tax-free income. However, it is also important to remember that in the UK, businesses must be incorporated legally with Companies House, and any information relating to the ownership of the company and the company itself are displayed on public record. Withdrawal of money from limited companies can present a challenge as well as benefits, albeit with slightly more complex, accounting and administration requirements,” adds James.

At Turner Little, we specialise in creating bespoke solutions for both individuals and businesses of all sizes. The knowledge and expertise of our specialists, ensures we are able to assist with any enquiries, no matter how complex. To find out more about how we can help you plan, get in touch with us today.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.