Pros Limited company
Being a limited company has several benefits, including:
1. Limited liability protection: Limited liability protection is a legal concept that separates a business’s debts and liabilities from the personal assets of its owners. As a limited company, you have limited liability protection, which means that your personal assets (e.g. your home or savings) are generally not at risk if your business is sued or is unable to pay its debts.
2. Access to capital: As a limited company, you have the option of selling shares or issuing bonds to raise capital for your business. This can make it easier for you to fund growth or expansion, or to cover short-term expenses.
3. Tax efficiency: Limited companies may be eligible for certain tax credits and deductions that are not available to sole traders or partnerships. They may also be taxed at a lower rate than sole traders, which can help you keep more of your profits.
4. Professional image: Being a limited company can give your business a more professional image and may make it easier for you to attract customers, clients, and investors.
5. Continuity: As a limited company, your business has its own legal identity, which means that it can continue to operate even if you are unable to work for any reason. This can provide stability and continuity for your business.
6. Ability to sell: As a limited company, you have the option of selling the shares of your business or transferring ownership to someone else. This can make it easier to exit your business when you are ready to retire or move on to a new venture.
Overall, being a limited company can be a good option for businesses that want to protect their owners’ personal assets, raise capital, and take advantage of tax benefits. However, it’s important to carefully consider the pros and cons of this business structure before making a decision.
cons of being a limited company
While being a limited company has several benefits, it also has some potential drawbacks, including:
1. Administrative burden: Setting up and running a limited company can be more time-consuming and expensive than being a sole trader. There are more administrative and compliance requirements, including preparing and filing annual accounts, holding shareholder meetings, and maintaining share capital.
2. Higher tax rate: Limited companies may be taxed at a higher rate than sole traders or partnerships. This means that you may have to pay more in taxes, which could reduce your profits.
3. Loss of control: As a shareholder in a limited company, you may have less control over the day-to-day operations of your business. You may have to consult with other shareholders and follow certain procedures before making decisions.
4. Difficulty dissolving: If you decide to close your business, you will have to go through a formal dissolution process as a limited company. This can be more complicated and time-consuming than simply closing a sole trader business.
5. Complexity: Limited companies can be more complex to set up and run than sole trader businesses. You may need to seek legal and financial advice to ensure that you are complying with all the necessary regulations and requirements.
Overall, it’s important to carefully consider the pros and cons of being a limited company before deciding if it’s the right business structure for you. It may be worth speaking with an accountant or financial advisor to help you weigh the potential benefits and drawbacks and make an informed decision.
