10 advantages of running your business as a limited company
instead of being self-employed
One major question to be resolved for a new aesthetics business is whether to operate it as a sole trader (self-employed) or to set up as a limited company.
Those starting out in business may find the apparent simplicity of being ‘self-employed’ appealing; but there are certain advantages of running as a limited company, especially as the business grows.
In our latest guest blog, we asked experienced accountant, taxation and business advisor Mike Purcell to share his advice on the advantages of running your aesthetics business as a limited company.
Benefits of Hiring an Accountant
“Clients often ask whether they would be better off trading as a limited company. The answer is…………..it depends. Although the sole trader route, which is commonly referred to as being self employed, is the most popular way of running a business in the UK, there are significant advantages of operating as a limited company. Some of those advantages you may value more than others.
“Setting up as a sole trader is by far the simplest way to trade. All you need to do is register with HMRC that you are working as ‘self employed’, and you will be issued with your tax reference number (a UTR). You then declare annually through your self assessment tax return, your business income and expenses.
“Starting a business as a limited company involves a more complex formation process, and the financial and administrative responsibilities of running a limited company are certainly greater than those of a sole trader. However, there are many benefits a limited company has over the self-employed route.
“Here are 10 advantages you should bear in mind when deciding what business structure you should use for your venture:
“The main advantage of running your business as a limited company is that you are likely to pay less personal tax than a sole trader.
“Limited company profits are subject to Corporation Tax, which is currently set at 20%. Whereas as a sole trader you could be liable for higher rate tax (40%) or tax at the additional rate (45%)
“If you are the director and shareholder of a limited company, you may choose to take a small salary and draw most of your income in the form of dividends. By doing this you can minimise the amount of national insurance (N.I.) you have to pay because dividends are not subject to N.I.
“As a sole trader, your profit is subject to national insurance. Running your business as a limited company could therefore help you to take home more of your earnings.”
A separate legal Entity
“A limited company is a separate legal entity from its owners. Everything from the company bank account, to ownership of assets and involvement in tenders and contracts is purely company business and separate from the interests of the company’s owners.”
“Whereas a sole trader and his/her business is treated as a single entity for tax and administrative purposes.”
“As the name suggests, if you run a limited company, you are protected in case things go wrong. Assuming no fraud has taken place, you will not be personally liable for any financial losses made by your limited company.”
“Those running a business as self-employed do not enjoy such protection from financial claims if things go wrong with their business.”
A more professional image
“In some businesses and industries, having a limited company can provide a more professional image.
“If you are doing business with larger companies, you may find that they prefer to deal only with limited companies rather than sole traders or partnerships.”
Funding can be easier
“Finding funding can be difficult for all types of businesses in the current climate. But because a limited company is a distinct entity from its owners it may be a little easier for a company to secure business finance than it is for their sole trader counterparts.”
Your business name is protected
“Once you register your company with Companies House, your company name is protected by law. No-one else can use the same name as you, or anything deemed to be too similar.
“As a sole trader, it’s possible someone else could trade under the same name as you, and you couldn’t do anything about it. This could damage your business, and in some cases, result in you having to go through the costly and time-consuming effort of changing the name of your business.”
“A limited company can issue various classes of shares. This means you can easily sell stakes in the company, or transfer ownership of shares. If your limited company has more than one shareholder then a Shareholders’ Agreement is recommended.”
The benefits can outweigh the additional costs
“Many people prefer to operate as sole traders rather than limited companies because the start-up and running costs are perceived to be significantly lower . However the advantages above often outweigh the additional costs”
“A limited company can fund its employees’ executive pensions as a legitimate business expense. This can offer a tax advantage over those who are running their business as self-employed.”
“If a shareholder wishes to retire, sell his/her shareholding, or dies, it is far easier to transfer ownership of a limited company than a non- registered business structure.
“If you would like to discuss which is the best business structure for your business, then please call Mike Purcell to discuss on 0161 432 1238. Or email firstname.lastname@example.org.”
by Mike Purcell
About Purcell & Co
At Purcell & Co offer bespoke accountancy packages to meet the needs of businesses whether they are a sole trader, partnership or limited company. This can include Business Support Service whereby clients can telephone , email or call in for a meeting whenever they need help. From those just starting out to companies pushing hard to grow their business, the company aim to give valuable business and tax saving advice throughout the year. See client feedback for reviews.
For further information, please call Mike Purcell on 0161 432 1238. Or email email@example.com.
SkinViva Training Academy Manchester
SkinViva Training Ltd offer a range of professional training courses for cosmetic and medical skin treatments.
Their courses in cosmetic treatments directed at suitably qualified and registered medical professionals who wish to learn and build on their skills in delivering these procedures.
See our full list of forthcoming training course dates.
SkinViva Training Academy was established in 2013 by Dr Tim Pearce MBChB BSc (Hons) MRCGP – learn more about us. The SkinViva Training Academy team upholds high standards of clinical training providing a combination of fully-supervised practical experience together with essential theory.
For further information, to discuss which course is right for you, to enquire about availability or to book a training course please call 0161 850 2491, or email firstname.lastname@example.org.