Is It Worth Setting up a Limited Company?
If you’re starting your own business, you’re legally required to submit your annual accounts and pay your taxes. This means you need to choose at least one business structure, whether that’s a sole trader formation, a partnership, or a limited company model.
What makes it worth setting up a limited company? For one thing, your clients will perceive you to be more professional and trustworthy, which is a big bonus if you want to drive sales. Running a limited company also enables you to legitimately pay less tax than you would as a sole trader.
Because limited companies are distinct entities from their directors, everything from the business bank account to company tenders and contracts are all considered separate from the directors and shareholders. Limited company directors have limited liability, which means they won’t be personally liable for any debts or financial losses held by the company.
Because of this limited liability and distinct separation between the company and its shareholders, it’s also easier to get funding for a limited company.
In short, there are lots of reasons that make it worth the while to form a limited company and deal with the financial admin that comes with it. However, if you are starting a new company, it’s important to consider your needs and preferences before choosing a business structure. Just because limited companies have their fair share of benefits, it doesn’t mean they’re right for you.
What Taxes do I Pay as a Limited Company?
There are a number of tax contributions that you will need to make as a limited company owner, including:
- Corporation tax
- VAT, or Value Added Tax
- Directors National Insurance (NI) contributions
- Your personal tax payments
Let’s look at these tax contributions in more detail and how much you’ll need to pay for each.