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Forming a limited company will provide access to a number of tax planning strategies and limited liability status. Although there is perceived prestige in operating as a limited company you will lose some of your privacy - directors' and shareholders' personal details and abbreviated accounts have to be filed and are open to public scrutiny.


A limited company is a distinct legal entity that is able to enter into contracts in its own name. The fact that the company is a separate legal entity from its owners is very important as it means that all the company's liabilities are the responsibility of the company - not that of the directors and shareholders!


The only exception is if you, as director of the company, offer a bank or other creditor a personal guarantee to repay the company's debt.  In that instance you then become personally liable to repay the debt if the company is not able to.


So what are the pros and cons of incorporating your business?


Significant advantages:


  • Limited liability status - as explained above, the company is a separate legal entity and this can protect your personal assets from business creditors if for any reason the company is unable to clear all of its debts and has to cease trading. Operating as such is especially useful if there are significant risks associated with your business activity.


Significant disadvantages:


  • Possible double taxation - the company pays corporation tax on its profits and can only distribute the remaining profits, known as retained profits, to directors and shareholders. This can give rise to tax being paid by both the company and by the directors or shareholders when they extract money from the company.


  • More cost - the professional costs for setting up the company and for preparing company accounts and tax returns can be higher than those you would expect to pay if you were self-employed.  There are then additional costs involved with various Companies House requirements.


Audit requirement - If your company exceeds certain turnover limits, or is in a particular trade sector, an audit may be required thus incurring further costs. We can advise on this, but most small companies will be exempt from annual audits.


Year-End Accounts

Tax Returns


VAT Return


Corporation Tax

Business Plans

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