When should I consider incorporating my business?
Posted on 7th June 2021
So, people have been telling you it might be worth going limited as you’ll be better off, or maybe it’s something you’ve been wondering about?
At Abaqus this is a question many sole traders ask us.
Incorporation is when a business registers as a limited company, whether it’s an existing business or a new one. For the purpose of this blog, we're focusing on the former.
Whilst a simple Google search will show that the admin involved in setting up a limited company is a simple task, running a limited company by contrast is a lot more complicated and a decision that shouldn’t be taken lightly.
Becoming a limited company means your company will become a legal entity in its own right; with this comes added financial protection, as you will no longer be legally responsible for it. Your finances will also be separate from your own personal ones. However, this then means that any profit your business makes, is owned by it, rather than you.
As a general rule of thumb, if your self-employed business has grown and is doing well (usually when profits are around £30-40k), it might be the time to explore becoming limited.
This will mean that your company will usually benefit from tax advantages, meaning more money in your pocket.
If your business, however, is operating on a lower profit below £30k, any savings made may be swallowed up when you also consider the additional costs associated with running a limited company.
We recommend that you don’t make such a complex decision on your own. It’s important to seek advice from an accountant who can thoroughly discuss your business in greater detail and the impact going limited will have.
At Abaqus we can discuss the best options for you, exploring different scenarios, pros/cons and how it will impact your business, along with making maximum use of the rules and regulations surrounding pensions, dividends and car ownership.
Contact us today to find out how we can help you!
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