Company structures, explained.

Words, hubbul

Forget feeling confused and scared by the idea of registering your business, here are your options broken down. Time it was spelled out simply. 

Limited company

It doesn’t take much longer than 5 minutes to set yourself up as a limited company. Choose your company name, head to Companies House to fill in the right info and you’ll have yourself a company usually within three hours, and for around £125. 

The good bits

  • Tax efficiency and flexibility - a limited company is typically the most tax efficient way to run. Company dividends are subject to 20% Corporation Tax on all profits, compared to sometimes higher rates for sole traders
  • Freedom and control - a registered company Director, you’ll be in complete control of your finances
  • Limited liability - your personal assets are never at risk
  • Claim a range of expenses - from accountancy fees, to technology, travel, internet and software
  • Professionalism - the ‘Ltd’ that will follow your company name usually carries more weight and with clients

The not so good bits

  • Less privacy - your company accounts and details are public
  • More responsibility - you’ll become legally responsible for filing annual company accounts and quarterly and annual corporation tax & VAT returns

Umbrella company

The idea of working through an umbrella company can seem a bit confusing. But once you’ve got your head round it, it’s pretty simple. Imagine it like this: the umbrella company is a little like your employer, and will contract you out to clients, sort invoices and do most of the things an employer would do for an employee.

Just like an employee you’ll be paid your salary, minus tax, national insurance and an amount for using the umbrella services. 

The good bits

  • Save time - stop wasting precious time and energy chasing payments and sorting tax
  • Fewer headaches - put simply, working through an umbrella company means less responsibility for taking care of accounts

The not so good bits

  • Less control- umbrella companies sort and takes care of your finances. You aren’t really ever in full control
  • Less money - along with the cost of the umbrella company services, you won’t qualify for the same kind of tax breaks as you would as a limited company

Sole trader

A business owned and run by one person only, a sole proprietorship is typically the cheapest way to set up your own company. Sole traders need to keep record of all their finances and sort taxes and National Insurance in their annual tax return. 

The good bits

  • Control -  as the sole owner, welcome to a world of being in complete control over how you run your company
  • Privacy - unlike a limited company, your details and company accounts can be kept private
  • Change as you grow - it’s easy to swap your legal structure if your circumstances change further down the line

The not so good bits

  • Unlimited liability - unlike a limited company, the buck well and truly stops with you. If the business gets into debt, you as the company owner are liable
  • Less credibility - like it or not, a sole proprietorship doesn’t have the same ring to it as a limited company. Clients typically prefer doing business with limited companies

Any questions? Just ask...

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