5 advantages of a limited company

Chris Andreou

November 25, 2020

advantages limited company guide

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Limited Company

What are the disadvantages of a private limited company?

The advantages of operating as a limited company are well known. It can be a great way to maximise your take-home pay, improve your credibility with customers and limit your personal liability. Like most things in life, it’s a case of what’s best for your situation. While the positives outweigh the negatives for most people, there are a few things you should know before you make the jump to a limited company.

In this article, we’ll outline the disadvantages of operating as a private limited company. Bear in mind that there are many advantages to a limited company and in many cases, these advantages will outweigh the disadvantages, so don’t think of this as a report of doom and gloom.

Disadvantage 1 – The admin of setting up a limited company

When you set up a limited company, it’s slightly more complicated than setting up as a sole trader. You have to 

  • Register your company through Companies House and provide them with all the information they need
  • Come up with a suitable name which is not currently in use elsewhere
  • Pay a small admin fee to Companies House to set up the company

These are all relatively small tasks (it’ll only take you a few hours), so it’s not a huge drawback by any means, but it is more time consuming than simply registering as self-employed.

If you subscribe to one of our accountancy packages, we can do all this for you. As part of the package, we will

  • Walk you through each step of the process
  • File your details with Companies House and HMRC
  • Provide a virtual office for managing mail

Registering a Limited Company Guide

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Registering a Limited Company Guide

Disadvantage 2 – Admin, admin, and more admin

One of the biggest advantages of operating as a limited company is the way it can optimise your tax position. All that extra take-home pay is not without sacrifice, however. Optimising your tax through dividends is much more involved and complicated than it is through a sole trader-style self-assessment. It requires not only a good understanding of the accounting side of things but also a hefty time commitment. 

This is where a good accountant can significantly lessen the admin burden. Here at Go Forma, we use best-in-class accounting software that is customised to your needs. With our help, you won’t be overrun with admin tasks and won’t be wondering whether you’ve filed everything the right way. We do all the heavy lifting when it comes to your accounts and accounts admin, freeing you up to spend more time on your business and your customers.

Disadvantage 3 – The cost of hiring an accountant

If you run a successful limited company, you’re unlikely to have the time to do your own accounts. As we’ve previously said, using dividends to optimise your tax position involves extra admin and a bigger time commitment. The best option is to get a good accountant to take this admin headache off your hands. 

Like all good tradespeople, a good accountant will cost you money. While this might seem like a disadvantage at first, you’ll come to realize that it’s cheaper in the long run. The truth is, a good accountant will save you more money than you pay them because you’ll pay much less tax and national insurance (if they’re doing their job well). Whether it’s cheaper or not will depend on how much money your company is making. For a quick calculation, check out our Take Home Pay Calculator.

If you’re in the market for an accountant, why not check out our accountancy packages? We’re competitively priced and our fees are tax-deductible.

Disadvantage 4 – Information about you and your business will be in the public domain

When you set up a limited company, Companies House will display some of your information publically. This will include your name, your filing history and the addresses of your registered office/business. If you’re a contractor or work from home, this could potentially mean your residential address is available online, which is not ideal, to say the least.

However, a good accountant will usually allow you to use their premises as a business/registered office address for a nominal fee. When you sign up for a Go Forma accountancy package, you’ll be able to use our virtual office as your registered office/business address, keeping your residential address off the public record. Your name and company accounts will remain online, but your more personal information will remain private.

Registering a Limited Company Guide

What's Inside:

  • What is a Limited Company
  • 10 step process for setting up a Limited Company
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Registering a Limited Company Guide

What's Inside:

  • What is a Limited Company
  • 10 step process for setting up a Limited Company

How to know if a limited company is the right option for you?

While there are small disadvantages to operating as a limited company, the advantages outweigh them if your business is the right fit. To find out whether a limited company could be the right business entity for you, check out our What Type of Business Structure is Best For You guide.

If you decide that a limited company is right for you, Go Forma can help you take home more money and give you more time to spend on your business and your customers. Check out our range of accountancy packages for more information or book a free consultation.

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