ChatterBank8 mins ago
self employed or limited company ??
3 Answers
I am about to go self employed as a decorator with 24 years experience, however I am not sure if I would be better self employed or if I set up a limited company. Can any kind soul enlighten and advise me on the benefits of both, many thanks in advance
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This link should be useful:
http://www.freelanceuk.com/tax_matters/self_em ployed_or_limited_company.shtml
If you are planning to work as an individual, I honestly think that you would be far better to be simply self-employed. The accounts will be a lot more straight forward and there will be a lot less red tape and interference.
http://www.freelanceuk.com/tax_matters/self_em ployed_or_limited_company.shtml
If you are planning to work as an individual, I honestly think that you would be far better to be simply self-employed. The accounts will be a lot more straight forward and there will be a lot less red tape and interference.
The main advantage of setting up a limited company is that it creates a clear legal distinction between your personal finances and those of the company. So, if the company goes bust, the creditors can't pursue you for the money.
The main disadvantage of setting up a limited company is the additional paperwork. You have to submit annual accounts, auditted by an accountant, to Companies House. Additionally you have to keep minutes of directors' meetings, etc.
If your way of working is likely to involve you in setting up credit accounts with various suppliers where, at any one time, you might owe thousands of pounds for the supplies you've received, then there might be some point in setting up a limited company. (i.e. If the firm went bust, you wouldn't have to pay these debts from your personal bank account). Also, if you expect to be employing subcontractors and you could reach a point where you owed thousands of pounds to those people, it would be sensible (for the same reason) to operate a limited company.
If, however, (as seems more likely) you'll be buying your paints, wallpapers, brushes, etc for cash (or opening a credit account where you'll never owe very much at one time) and you won't have any subcontractors or other people to whom the firm could owe lots of money, there would be no point in seeking the financial protection offered by the formation of a limited company. All that setting up such a company would do, would be to give you some extra administrative headaches for no real benefit.
Chris
The main disadvantage of setting up a limited company is the additional paperwork. You have to submit annual accounts, auditted by an accountant, to Companies House. Additionally you have to keep minutes of directors' meetings, etc.
If your way of working is likely to involve you in setting up credit accounts with various suppliers where, at any one time, you might owe thousands of pounds for the supplies you've received, then there might be some point in setting up a limited company. (i.e. If the firm went bust, you wouldn't have to pay these debts from your personal bank account). Also, if you expect to be employing subcontractors and you could reach a point where you owed thousands of pounds to those people, it would be sensible (for the same reason) to operate a limited company.
If, however, (as seems more likely) you'll be buying your paints, wallpapers, brushes, etc for cash (or opening a credit account where you'll never owe very much at one time) and you won't have any subcontractors or other people to whom the firm could owe lots of money, there would be no point in seeking the financial protection offered by the formation of a limited company. All that setting up such a company would do, would be to give you some extra administrative headaches for no real benefit.
Chris
My tax advisor told me that there are tax advantages in having a limited company rather than being a sole trader, even though I do not have much in the way of creditors to worry about or need protection from, so it would be worth checking that out. If you are only going to work for main contractors under the CIS scheme then a portion of your tax will be deducted for you form each payment and it wont be such a bother I would assume. Worth checking the tax aspect out though.
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