Limited Company

[jtlover]

I have a new job and it will be as a limited company - just wondered what the advantages are of this and also the disadvantages, if anyone can tell me. I have just taken on a new job and they want me to be a limited company

 

[Boss Hogg]

Pro's and con's a lot of the time depend on peoples views of limited companies.

Main advantage to you is your limited liability. As a sole trader you are totally liable for any problems that occur as a result of what you do, whereas as a limited company it is the company which is liable and as an individual you have no liability (as long as there is no negligence or wrongful trading involved).

For that reason, some people are wary of small limited companies, but that is simply a perception.

Cons are that your accountancy bills will be higher as a limited company as there is legislation about what accounts must be prepared, whereas as a sole trader the legislation is much lower (if not even non-existent). Also, as a new limited company you will have no credit record/history so gaining credit terms with suppliers etc. will be harder to achieve.

Why have your clients asked you to be a limited company?

 

[Goofyish]

I've worked with quite a few contractors who are limited companies. I believe it used to quite a good deal until the government tightened up the tax rules etc a few years ago.

Most of the folks I talked to 'bought' an already registered company off the shelf to begin with. They seemed to draw low salaries from the company but then pay themselves a monthly dividend after paying corporation tax on any 'profits' made. I believe paying corporation tax works our cheaper then paying income tax

As Matt says you will need an accountant!

 

[higgy66]

We use a lot of self employed contractors and for some reason a couple of years ago the company announced that they either had to be a limited company or come on our books for the duration of the job and pay tax & NI.

They now have to have public liability insurance so not sure if this has anything to do with it??

In my opinion if the company I work for made this discision it can only be for one thing - to save us money - so I'd guess this is the main reason???

 

[Cyrano]

I'd repeat the good advice you would be best to speak to a solicitor or an accountant to look through what this could mean to you. Technically it doesn't mean you have a new job as you will not be employed by the company. They will contract the Ltd Co who would therefore has the ability to sub-contract/employ as they see fit.
If you cannot sub-contract Inland Revenue will become involved since they will see this as an exercise in PAYE evasion. IR ask a number of questions that you need to aswer yes to all otherwise you are to all intensive purposes an employee. I have been there with this one and it was not nice

You will need at least 2 people to register a Ltd. Co. Matt is right that it limits liability which is attractive to the individual. But it is not a licence to do anything. If you trade illigally (ie knowingly cannot pay a debt before entering a contract), do not exercise your full responsibilities as a director under the Companies Act then you can be personally liable.

I'd firstly be questioning what is the drivers for establishing a Co.

 

[Elise79]

The main benefit for most people of incorporating is the tax savings to be had (even after the tightening of the tax legislation!)

The best advice is to talk to your own accountant they are best placed to give you good relevant advice. But please bear in mind some accountants still aren't as 'enlightened' as they should be and you may need to switch.

Elise

 

[allie5]

We have a limited company and have done so for year. This Labour government, supposedly the party "for small business" have nearly succeeded in closing us down many times with the tax changes.

My one piece of advice is GET A GOOD ACCOUNTANT! Ours is fabulous and if you are in London or the home counties I can pass on his details if you would like. We never pay huge amounts of tax (our books are totally legitimate - its just our accountant is exceptionally good!) and whereas before we had him I used to dread anything hitting my mat from the revenue, I now know there is nothing he cant sort out!

The other big downside is it can be hard to get a mortgage or credit - you are not exactly self employed as you are "employed" by the limited company and this causes headaches on a lot of forms. A good accountant will help you with this.

Good luck!

Allie

 

[Andy B]

What type of business, it is because your employers can aviod tax and national insurance liabilities, they are just wanting to pay you as another cost not as employee. You will also have to take out public liability insurance.

 

[floridalol]

Footballers and entertainers and the like are normally "limited companies" but with their massive earnings that is a worthwhile thing. Unless you are going to be earning megabucks it seems like the company you will be working for are opting out of their responsibilities, you will not get paid holidays for one example, IMO it would be advisable to get a very good accountant to look into everything before you proceed.