When you become your own boss, you have the opportunity to choose how you work and earn various other benefits such as tax planning and increasing your salary. However, there are a few things you need to consider before taking the plunge. As a director of a limited liability company, you have a number of new responsibilities, such as filing your company`s records. A limited liability company has its own legal identity. Thus, third parties enter into contracts with the company and not with the directors or individual shareholders. Unlike a sole proprietor, several people can take a stake in a company by allocating shares. By starting a business, you can reduce your income tax and social security contributions (NIC) by taking a combination of salary and dividends. If you keep your administrator`s salary below the primary NIC threshold, you do not have to pay income tax or Class 1 social security on that income. In addition, the company does not have a payroll tax because salaries are a tax-deductible business expense. Talk to one of our friendly consultants who can guide you through the process. We create your business for you, register you for all your taxes and help you every step of the way.

The preference over limited liability companies is due to the fact that they are more strictly supervised and have accounting and reporting obligations that sole proprietors do not have. Since their information is published publicly, it is also considered transparent, which contributes to their professional image. Operating as a limited liability company often gives suppliers and customers a sense of trust in a company, and often other companies prefer not to negotiate with public limited companies. The Companies Act 2006 entered into force on 1 October 2009. It introduced a number of changes to facilitate the management of a limited liability company. The government continues to explore ways to give well-run businesses the freedom to continue their operations rather than deal with red tape. Dear Am Baio, We are not retirement consultants, but if you receive a state pension and set up a limited liability company, you will declare the state pension in a tax return with all the income of the limited liability company. Honestly, Rapid Formations Team The advantages of being a limited liability company over a partnership include flexible taxation and limited liability protection for business owners. Partnerships, on the other hand, are very easy to set up and do not require as many formalities as limited liability companies. There is no doubt that setting up a company will reduce your liability in case of financial difficulties of your company.

A limited liability company also offers many tax advantages; There are many benefits to having a prestigious professional image and status, and you can start a business for charitable or charitable purposes. You may think it`s not a big deal, but the truth is that it can hurt your business. Think about it; If there is a company with the exact same name as your business (or even just similar), people can confuse you both. If they don`t have the best reputation, your sole proprietor name will be associated with the name of their business, which will damage your reputation. We all know that risk comes with territory when you run your own business. However, there are ways to minimize your risk as a self-employed worker. With a limited liability company, you are protected against debts that the company can incur if your company becomes insolvent. As an unrestricted company, personal assets can be threatened in the event of the company`s bankruptcy, but this is not the case for a limited liability company.

As a shareholder, you cannot be held personally liable for the debts of a limited liability company, which means that your personal assets are not threatened. Which hapoens with the state pension siruatuon, if you become a company LTD. For a limited liability company, a higher net salary is clearly on the agenda (see our net salary calculator for more details). However, changes to the dividend tax system over the years have resulted in a reduction in some of the tax benefits and limited liability shareholders facing higher taxes. But for many people, it may be even more tax-efficient to work as a limited liability company. The latest interest rates and some examples of work can be found in our article “What tax should I pay on dividends?”. As a shareholder, you are not legally required to pay more than the par value of the shares you hold. If your company becomes insolvent and is unable to pay its creditors, you only have to bring the nominal value of your unpaid shares. In addition, your personal property is protected. If your limited liability company has more than one shareholder, you must enter into a shareholders` agreement that describes your various duties and responsibilities. It can also be used to describe in detail what shareholders can and cannot do with their shares.

This will prove invaluable if a shareholder wants to withdraw from the sale. Taking calculated risks is an essential part of doing business, whether you`re a sole proprietor or a limited liability company, but only the latter insulates you from a calculated risk that has gone wrong.