What is a Limited Company (LTD)?
A limited company, also known as LTD, is a corporation whose finances are separate from the personal finances of their owners.
Should I go Limited (LTD)?
Yes
- Provides Freedom and Independence - You'll be the director of your own start up business and will have complete control over your accounts. Those who typically go limited tend to be small businesses, contractors, freelancers and independent consultants.
- Easy to Set Up - This can be done online or through a contractor accountant.
- Branding - A limited company, even a small business, has far greater credibility than an individual; therefore in most situations you are more employable because customer risk is reduced.
- Reduced Taxation - Save tax through minimized salary and maximized dividends from limited company profits. Other advantages involve claiming for a wider range of expenses and access to the 2002 VAT Flat Rate Scheme.
- Management - Provides structure from which your business can grow and build up a good credit rating.
- No Personal Financial Liability - The liability lies with the limited company and not the individual, so your personal assets will not be at risk.
- Virtually Hassle Free - A good contractor accountant should take care of all accountancy requirements, leaving you with minimal paperwork.
Image by Dennis Wong (flickr.com)
No
- More Responsibility - Things like communication with HMRC, Companies House and Annual Returns.
- Concern over 'IR35' - You will need to follow IR35 tax rules or face a penalty. However it is worth noting that if your contract falls outside 'IR35' rules you're still likely to be better off than with an umbrella company.
- Some Liability - You will still be liable for any loans that you have had to personal guarantee, often known as 'PG'.
- Potentially Hassle Full - Make sure that you get a good contractor accountant in order to avoid the pitfalls and penalties of dubious accounting. A top quality accountant doesn't have to be expensive but you do want one that you can easily get in touch with - there is nothing worse than being left waiting when you're trying to sort out your bookkeeping.
Related Crunch Guides:
Should I start contracting?
Choose the right contractor accountant
How to set up a Limited Company
How to open a Limited Company bank account
Umbrella vs. Limited Company
Pros and Cons of being a soletrader
Standard rate VAT or flat rate VAT scheme
