Contractor Accountants - Benefits of a Limited Company
The principal benefit of trading as a limited company has always been the limited liability of the company's officers and shareholders. As a sole trader or other non-limited business, personal assets can be at risk in the event of a failure of the business, but this is not the case for a limited company.
As long as the business is operated legally and within the terms of the Companies Act, the personal assets of directors or shareholders are not at risk in the event of a winding up or receivership.
Operating as a limited company often gives suppliers and customers a sense of confidence in a business. Larger organisations in particular will prefer not to deal with non-limited businesses. Also, many of the costs associated with managing and operating a limited company are not much more than with a non-limited business.
Main benefits of contracting through your own Limited Company:
Higher take home pay
You'll typically take home around 75% - 80% of your contract by working through your own limited company, you can take home as much as £15,000 per year more on a £350 daily rate compared with using an Umbrella Company.
Claim on a wider range of expenses
Anything that is solely classed as a business cost can be claimed back on expenses. Trading through a Limited company means you can claim on a wider range of expenses such as accountancy fees, equipment, software, phones, travel, Internet and much more.
Entitled to the Flat Rate VAT scheme
The Flat Rate VAT scheme can generate thousands of pounds of extra profit a year, with most contractors choosing to apply for this VAT scheme.
Personal assets are covered
As a non-limited business, personal assets can be at risk if the business fails, but this is not the case for a limited company. As the shareholder you can not be held personally liable for the debts of a limited company, meaning your personal assets are not at risk.
Complete Control of your Business
You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator or umbrella company.
Ease of use
Running your own business isn't difficult; submit spreadsheets to your accountant - just like umbrella time-sheets and expenses. Working through your own limited company does require a certain level of commitment but typically most contractors tell us they spend around 15 – 20 minutes per month managing their company.
Greater opportunity for tax planning than PAYE Umbrella
It goes without saying that working through your own limited company is more financially rewarding, which is only fair bearing in mind the extra responsibilities and loss of full time employment benefit.
Company given more credibility
Operating as a limited company often gives suppliers and customers a sense of confidence in a business and quite often other companies prefer not to deal with non-limited businesses.
Protection of your company name
Once your proposed company name is registered as a limited company, the name is protected by law and no one else is allowed to use it, waiting to register your company could mean you lose the name you had initially wished to trade under.
There is no obligation for a limited company to commence trading within any set time period after its incorporation.
Running your own business is easy - EAFS will provide you with a dedicated account manager to handle your records and any questions you may have while you can remain in the driving seat taking control of your finances