Company formation is the process where one registers a business as a limited company at Companies House. Thus, the company now becomes a distinct legal entity. This process is also known as ‘company registration’ and ‘company incorporation’. When a company is incorporated, it becomes a separate ‘person’ in the eyes of law. Incorporated companies are completely independent of their owners in terms of liabilities, finances, ownership of property & contractual agreements.
This is the main advantage of registering a limited company. You are likely to pay less tax than a sole trader. Also, you can choose to take a less salary and draw most of your income in the form of dividends. Thus, you can minimise your payment to National Insurance Contributions (NICs) as there is a separate tax for limited company dividends and are not subject to the NICs.
Registering a limited company helps you to keep your personal finances independent of the business activities. The term ‘limited liability’ means even though your business fails or does not gain profits as per expectations, you will not be personally liable for any loss made by your limited company.
In the corporate world, having a registered limited company enhances your professional image and helps to grow your business at a faster rate as compared to sole traders.
With a registered limited company, it will be easy for you to consider a loan for growing your business or to attract investment.
Once the limited company gets registered with Companies House its name is automatically protected i.e. nobody has the right to use the same name for his/her own purpose.
A limited company can fund its employees’ pensions which will be counted as a legitimate business expense. This is not an option if your business is a sole trader.
You need to register your company with Companies House in the UK. Companies House is the Registrar of Companies in the UK. It is an official government agency. It is an Executive Agency of the Department for Business, Innovation and Skills (BIS). All UK limited companies and Limited Liability Partnerships and overseas companies with a place of business in the UK are legally registered with Companies House.
You might be thinking that registering a limited company will be a tedious process, but, it is much simpler especially when our company formation accountants are with you! We can assist you in registering your company, provide quality company formation advice and offer a wide range of financial services for supporting your business.