Setting up a business in the UK has many benefits. These benefits include reduced liability, greater credibility and tax advantages. UK companies have their legal identity, allowing them to enter into contracts and own property.

These benefits, however, come with a price. How easy is it to start and manage a UK company? This article will discuss the benefits of being a UK-based company.

Tax advantages

A registered UK Company is likely to pay less personal income tax than a sole trader or self-employed. Corporation tax will apply to your  company profits. It is currently set at 19% for the 2018/19 tax year. According to the plan, this rate will be reduced to 17% by April 2020.

You can choose to receive a modest salary as a director and then earn more through shareholder dividends. This will allow you to reduce your National Insurance Contributions (NICs).

UK company dividend payments are exempt from NIC because they are taxed as an individual entity. This means you may be able to take home more from your business.

Your company will be an entity in its own right.

A UK company registered as a corporation will have its entity completely independent of you. This means that all assets, including loans, credit agreements, and bank accounts, held by the company in a separate entity. If the business is forced to close, your assets are protected.

Limited Liability protection

Sole traders do not have limited liability protection. They will be personally responsible for any business debts. A limited company provides "limited liability" protection.

Limited liability protection means that the company, not you, will cover any financial losses incurred by your company. While this may require you to sell assets or recover security deposits to pay creditors, your assets and money will not be affected.

Professional image

Your company will look more professional if it forms a Limited Company. This will help you build trust and confidence in your products and services.

Many large corporations will not do business with you if you are your sole trader, but they will work with you if your limited company is in the same category.

Better business financing

A UK  company makes it easier to fund your business with the necessary credit, financing, and loans. Because you are a limited company, you will have more options for financing your business. Many lenders will offer you better interest rates and terms.

Protected business name

Your company name will be register at Companies House. It will then be add to the official list of companies. This means that your business name will be register with Companies House and placed on the official register of companies.

You cannot trade under the name of your registered company, even if your business is similar or is in the same industry sector.

This is great as it will ensure that you know your business is protected from anyone trying to steal your customers or to set up a direct competition to yours with the intent to confuse your customers.

Business Costs

It is common to believe that setting up a limited UK company can be expensive. This is because it requires hiring a lawyer and preparing legal documentation. Most people surprised to learn that you can set up your limited company for as low as PS7.48 with our digital package. You don't even need to pay for legal assistance.

You can benefit from working with an experienced team of formations professionals such as Your Company Forms. They have worked with Companies House since its inception and are based in London. You can set up your company quickly and easily with our assistance, usually in one working day.

Shareholder options

You can form your own company as a sole trader. The director and shareholder of the company are you. To form a company, you only need one shareholder. However, just because you are operating alone does not mean you can't form your own company.

You may also consider issuing shares to raise funds for the company. There are many classes of shares you can issue, and each class has its own rules and responsibilities. By drafting your shareholder agreements, you can determine what voting rights and control your shareholders have within your company.

Pension contributions

Your business can pay for your executive pension as a limited company and claim it as an expense. Your business will have a significant tax advantage over a sole trader.

Legacy issues

Imagine that you involved in an accident that results in your death or renders you incapable of working. This would be devastating for a sole trader. If your business is a limited company, you can make plans to transfer ownership to another person.

If you decide to retire, you have the option to sell your shares to family members or other shareholders. This will allow you to retire confident that all your hard work in building your business wasn't waste and that it will continue to live on in your absence.

Personal Preference

The decision to incorporate a business or not can be based on personal preference. If you feel comfortable running a business, then incorporating a new company is an easy decision.

A UK limited company can provide a solid foundation for your business to grow and develop in many situations. In certain situations, however, it may be more appropriate to operate as a sole trader or a limited company.

Many successful and large businesses were started as small companies. Inform Direct can help you set up your  company if you have decided that a limited company is a right choice for your business.

Pension possibilities

Instead of an employee director paying out taxed income to fund pensions, a company can contribute to pensions. A company can often make a greater tax-relievable pension contribution than an employee.

Contributions are usually deductible as an expense. The contribution should be eligible for tax relief by the corporation.

Employers and employees do not have to pay National Insurance Contributions. In addition, contributions are generally non-taxable. If you require advice, it is a good idea to consult a professional advisor.

More options when raising new capital

Sole traders and partnerships typically need to raise capital from their resources. However, companies can raise capital by issuing shares. Existing shareholders and new investors can receive new shares, but only public limited companies allowed to offer shares to them.

To offer flexibility, creating one or more new shared classes can be use. You can adjust your voting rights and receive dividends if the company is wound down. Although the company can be easily are establish to allow for new shareholders, it is possible to include pre-emption rights to safeguard the interests of existing shareholders.

Tax-advantaged programs such as Enterprise Investment Scheme (EIS), and Seed Enterprise Investment Scheme(SEIS), are available to help companies raise capital via share issues. Businesses that established as companies may not be eligible for grant funding.

A company may get a lower interest rate than a sole trader if it borrows money from a bank. A loan may be available without having the directors provide a personal guarantee. Sole traders, however, will be subject to a charge on the private residence.