Top 6 Advantages of Setting up a Limited Company

company formation UK

The number of limited companies is increasing at a very fast pace and there are more than 3.5 million limited companies incorporated in the UK. There are many advantages of setting up a limited company in the UK and some of the advantages are below.

1. It’s quick and easy to get started

Incorporating a limited company in the UK is very easy and it can all be done online. You don’t have to wait for hours and you don’t have to do a lot of paperwork to incorporate a company. However, if you are new to the UK and don’t know the rules then we recommend using the UK company formation service.

2. The company has a separate legal identity

A limited company in the UK has its own legal identity. While doing the business, all third parties like suppliers and distributors contract with the company and not the individuals like directors and shareholders. This allows the company to survive in the case of the death of the owner and other directors and shareholders can continue working with the company.

3. The owners’ liability is limited

The shareholders of a limited company in the UK have a limited or capped liability for the debts of the business.  The shareholder’s liability is limited to their shares and the unpaid amount on any nil or partly paid shares if there is any.  Practically it is usually just the amount paid for the shares plus any unsecured loans made to the company.

4. Potential credibility and prestige

The incorporation of a private limited company is the indication that the business has permanence and is committed to effective and responsible management. It builds trust in both suppliers and customers. Big companies normally will not deal with an entity that’s not a limited company. It is very important to incorporate a business as it opens up new business opportunities that wouldn’t otherwise be available.

5. There can be tax benefits

In the UK, the corporation tax rates are lower than the income tax. Sole traders and partners in other forms of businesses like partnership pay income tax which is higher than the corporate tax. So, by incorporating your business you get the tax benefits in the form of low tax rates.

6. Options when raising new capital

When sole traders and partnerships want to raise new capital they usually rely on personal contacts and personal resources. But when you have incorporated a company you can raise new capital by simply issuing new shares. These new shares can be offered to existing shareholders as well as new investors.

If you know other benefits of incorporating a company in the UK then do let us know in the comments section below.

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