A Limited Company is a type of company that is limited to what they have invested or guaranteed in the company. If you set up as a private limited company, you’ll either be limited by guarantee or by shares. Both require the business to be legally separate from the person who runs it, and for the business finances to be separated from your personal ones.Get Started
If you’re limited by guarantee, you will have ‘guarantors’ and a ‘guaranteed amount’, and profits will be invested back into the company.
If you’re limited by shares, your company will have shares and shareholders. They can keep any profits made after tax is paid.
Setting up as a limited company allows you to legitimately pay less tax than you would as a sole trader. As the Company Director, you can have a relatively low salary (less than £6000) which won’t be subject to tax, while the company will pay tax on profits at 20%. The Company Director will then receive payment through dividends which are not liable to National Insurance payments.Get Started
First off, organising all this is a lot of hassle – you’ll have legal duties and will have to regularly produce accounts. Secondly, you won’t necessarily be entitled to certain employee benefits. And finally, you may be subject to the IR35. (add link to definitions and FAQ page).Get Started