Forming a Limited Company in Kingston upon Thames
Choosing the right structure for your business is an important decision and one which requires careful consideration. We can help you determine whether it is best to trade as a sole trader, a partnership (two or more individuals or companies), a limited liability partnership or a limited company.
Many of our clients often ask whether they should form a limited company. Unfortunately there is not one 'fits all' answer, as your decision will be influenced by a number of factors. As well as the likely tax implications, the nature of the business, the expected rate of growth and the degree of commercial risk will all need to be considered.
The privacy offered by operating as a sole trader or partnership can be attractive, particularly while your business is still in its early years. Unlike incorporated businesses, these structures also mean there are fewer restrictions on the use of business funds.
A limited company is a completely separate legal entity subject to two main areas of regulation - tax and company law - and there are advantages and disadvantages to operating as one.
Possible advantages of forming a limited company include:
- Ownership can be readily transferred
- Legal continuity - a company can own property, sue and be sued
- Companies can usually borrow more from a bank than can a sole trader or partnership
- Limited liability - if a shareholder has paid fully for his or her shares, he or she cannot normally be required to invest any more in the company
- Growing businesses can re-invest profits after an overall tax charge of 20% (if profits are below £300,000), compared with over 40% for higher-rate tax paying sole traders and partners
- Director/shareholders can be paid in dividends - with possible tax advantages
- Corporate status is sometimes thought to add to the credibility or commercial respectability of the business.
Possible disadvantages of forming a limited company include:
- A company must file a company tax return
- Funds withdrawn from a company normally give rise to further tax liabilities
- Legal and administrative costs of incorporating
- Remuneration for directors is subject to both employee's and employer's National Insurance liabilities
- The 'IR35' legislation relating to personal service companies could be relevant, especially for IT contractors and other service providers who work for only one customer
- Annual accounts must comply with the requirements of the Companies Act 2006
Choosing the right trading structure for your business is important, and it is advisable to seek the support of experienced professionals. If you are considering starting a limited company in Kingston upon Thames, Alderwick James & Co will assess your circumstances to help you decide on the right structure.
If you do decide to form a limited company, we can assist you so that you get the right type of company to suit your needs.
We can also assist with the company secretarial requirements after the incorporation of the company.
We have a wealth of experience in helping to form successful limited companies in Kingston upon Thames and the surrounding areas - contact us today for more advice.