• If a limited company should fail there is less risk to personal and family assets than there is with sole traders or partnerships.
• A company only needs one shareholder who can also be a director, and a company secretary who does not need to be a director.
• Companies with a turnover below £1 Million do not need an audit making the cost of year end accounts much closer to those of a Sole Trader.
• Shareholder Directors can select a package of Low Salary and Higher Dividends aimed at reducing Tax and National Insurance both for the individual and the company. Savings can easily be over £2,750 per year if sole trader profits are as low as £15,000, and in the region of £4,000 per year compared to a sole trader with £37,500 profit.
• Shareholdings can be split between family members to spread the dividends and reduce higher rate tax liability (or eliminate it all together).
• Companies with profits below £10,000 pay no tax. If profits are between £10,000 and £50,000 tax due is between 0% and 19% with profits up to £300,000 tax is due at only 19%, rather than the basic rate of 22% or higher rate of 40% personal tax.
• Since April 1999 advanced corporation tax (ACT) has no longer been due on dividend payments, which means that no tax is due on the company profits until 9 months after the companies year end giving a cashflow advantage compared to Sole Traders with interim payments in January and July.
• Companies can be easier to sell than Sole Traders or Partnerships.

There are a few disadvantages

• As long as the company does not trade whilst insolvent and there is no fraud there is very little risk to the directors.
• There is a higher paperwork burden with a company.

All things considered, the benefits of incorporating generally outweigh the disadvantages.

If you would like more information regarding the benefits of incorporation, please email us or call +44 (0) 870 160 3463.