3 Disadvantages of a limited company

Chris Andreou

June 5, 2021

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.

While the positives outweigh the negatives for most businesses, there are a few things you should know before you make the jump to a limited company. We'll outline the downsides of doing so below.

Disadvantage 1 – The process 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'll have to: 

  • Register the company through Companies House, and provide them with all the information they need
  • Come up with a suitable company name. The name musn't be in use presently elsewhere
  • Pay an administrative 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 the process is decidedly more time consuming than registering as self-employed.

Here's where we come into the picture. If you subscribe to one of our accountancy packages, we can complete these tasks on your behalf. As part of the package, we will:

  • Walk you through each step of the company registration process
  • File your details with Companies House and HMRC
  • Provide a virtual office service, so you can manage your mail more easily

Registering a Limited Company Guide

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Disadvantage 2 – Administrative burden

Enjoying greater tax efficiency is one of the biggest advantages of operating through a limited company.

The additional take-home pay doesn't come without sacrifice, however.

Optimising your tax through dividends can be complex, and is more complicated than completing your Self Assessment tax return (as a sole trader). You'll need to have a good understanding of accounting, and set aside a significant amount of time to manage your taxes and business finances.

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 publicly.

This includes your name, filing history and the addresses of your registered office/ business. If you’re working from home, this could potentially mean your residential address is available online—which isn't ideal, to say the least.

There's a way of getting around this. When you sign up for our accountancy package, you’ll be able to use our virtual office as your registered office/ business address, thereby keeping your residential address off the public record. Your name and company accounts will still be visible on the public records, but other personal information will remain private.

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

While there are disadvantages to operating as a limited company, you'll find that the advantages typically outweigh the downsides if the structure is a good fit with your business.

You can learn more about this in our guide on the different types of business structures, or reach out to our GoForma accountants by booking a free consultation.

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

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disadvantages limited company guide
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Registering a Limited Company Guide