No one likes having to pay taxes, but it’s a fact of life in many cases. However, by forming as a limited company, you may be able to reduce the amount of tax you have to pay, thereby keeping more money in your business’s bank account instead.
Accordingly, if you have been looking for a way to keep costs down, especially if your firm has relatively high profits and income tax would be charged at around 40%, operating as a limited company could be more cost-effective.
Pay Dividends
Another great reason to operate as a LTD company is that it allows you to pay your directors and owners in dividends. This offers much greater stability for the business model overall. Indeed, it means that if your firm doesn’t perform as well as expected, you won’t have to pay the directors as much for their work. However, the inverse is also true; if the business does well, you can reward your owners and directors through dividends as a proportion of the company profits. What’s not to love about that?
Advantages of a LTD company – ways to Raise Capital
A great perk of operating as a public limited company is that it allows you new options to raise capital overall – which can really come in handy if you have a new project underway or need help covering costs until your next payment comes in. Namely, LTD companies can issue new shares to help bring in additional income for the business, therein allowing the firm to continue growing even when funds may not necessarily allow this at the outset.
Transferring the Business
Sometimes, once you’ve achieved success with your business already, you might find yourself feeling tired of the hustle and bustle. Or maybe you’ve set your sights on a new project and want to call it quits with your previous business?
In any case, operating as a limited company can help since this allows business owners to transfer or sell the business to someone new. As such, rather than just having to cease trading if you decide to give up, you can easily move the business into someone else’s name.
Advantages of a limited company – Protected Business Name
Your brand is integral when managing a business since this is the first thing potential customers will see about you. In line with this, protecting your brand is important – and limited companies support this goal by securing your business name.
Indeed, if you find that another company tries to use the same name as yours, and you’re already a limited company, you can potentially place an objection about the name; this helps keep your brand unique to your firm overall.
Advantages of a limited company – Claim Expenses
When it comes to your business, ensuring that you’re able to accurately put through your profits is crucial. With this thought in mind, running your firm as a limited company offers a further benefit: it allows you to claim back expenses, reducing your tax bill overall. Not all company structures can necessarily do this, meaning that you may end up paying more than you should have to. And, after all – no one wants to lose money on their income!
New Feedback and Input from Shareholders
We’ve already mentioned the benefit of being able to raise shares for your new business through shareholders. However, there’s more to shareholders than just offering up money for your firm – they can also contribute to the success of the company.
Indeed, a shareholder is a partial owner of the company, and this allows them to have a say in the firm’s decisions corresponding to their total percentage of all shares. For example, a shareholder owning more than 50% of shares will always be the majority owner (until they sell any of their shares), and so this gives them the power to make company decisions. However, a shareholder with 10% of the company shares can also chip in ideas and vote on potential decisions, with their of the final vote.
While many people initially assume shareholders to be a nuisance, this can actually be a brilliant opportunity to find new strategies for your business. It allows firms to enjoy greater inputs for their decisions, potentially bringing new ideas to light that might not have otherwise been thought of. This can help firms make the right decisions – or otherwise avoid potentially problematic strategies.
It’s So Easy!
Along with all of the other advantages of limited company structures, it’s also worth considering that getting started running your firm as a limited company is so easy. In fact, in many cases, it only takes a couple of hours to get everything you need to apply to launch a new limited company.
It’s also surprisingly affordable in many cases, and you can reclaim the incorporation costs as part of your corporation tax bill at the end of the day. With some brands, incorporating can cost as little as £10. So, this really won’t have much of a dent in your business’s overall set up costs, on the whole (considering that the average cost to set up a new business is around £5000.
Find Out More About the Advantages of a Limited Company Today
If you have any further questions about the advantages of running your business as a limited company, or if you’d like help setting up as a limited company, contact our team today. As your friendly local accounting services provider, we’re here to help you get started with the right approach.
