FINANCE
Expertise – Baines Jewitt directors Mike Bigley , Trevor Cook , Jed Lester , Anne Cowley and Don Adams .
LIMITED OPTIONS
Is setting up a limited company in the UK a wise business move ? Baines Jewitt explores the advantages and challenges ...
PICTURES : CHRIS BOOTH
Whether to earn more money or do more of the work they love , many people are taking control and starting a new business . Yet when it comes to structuring a business in the UK , there are several options to consider .
Exploring trading alternatives To launch a new business , or grow an existing business , there are four established structures : sole trader , forming a partnership , establishing a limited liability partnership ( LLP ), or incorporating a limited liability company .
Each trading option determines how much tax is paid , but the decision principally depends on the nature of the business and level of risk .
For example , it makes sense to be a sole trader if you ’ re creating decorative products in a home studio , with little scope for risk and modest sales .
However , if a business produces lifesaving medical equipment , using plant in a rented factory and employing dozens of people , a limited company is sensible .
Understanding the advantages of each option is crucial for making an informed decision that aligns with business goals and aspirations .
Trading as a limited company Trading as a limited company might sound daunting , but it can provide significant benefits compared to alternative structures .
A limited company is a separate legal entity from its owners , which protects personal assets if things go wrong . This concept , known as limited liability , is one of the major advantages of running a limited company . In addition , limited companies often provide a more professional image , which can enhance credibility .
Baines Jewitt director Don Adams explains : “ One of the key attractions of trading as a limited company is its tax efficiency . Unlike sole traders or partnerships , limited companies pay corporation tax on their profits , which can result in lower tax bills . Furthermore , access to finance can be easier , as limited companies can issue shares to raise capital .
“ Despite these benefits , setting up a limited company is not without its challenges . There are legal responsibilities and administrative tasks involved , but with careful planning and the right advice , these can be easily managed .”
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