Benefits Of Going Limited
If you’re a contractor, you might be one of the many who work through an umbrella company. It’s a choice many make as they consider it to be a simple solution to their problems.
Unfortunately, using an umbrella company can mean that you’re losing out on a fair bit of money and some other benefits. Here’s a look at why it’s worth considering taking control back into your own hands.
Whether you’re self-employed or getting paid as a Contractor through an Umbrella Company, the situation is the same (more so if you’re with an umbrella so you can ditch the fees), going limited can mean being much more tax efficient and therefore more cost efficient. Here’s how it works.
By forming a Limited Company, you become the Director. Then what you do is, pay yourself the minimum wage - bear with me - as this means you’ll pay a very low rate of income tax. Then you pay yourself through dividends at a flat Corporation Tax rate of 20%. This can, if you’re earning the right amount, save you a lot.
It’s Incredible Simple and Cheap
Many people see setting up a company as a bureaucratic maze of forms and unintelligible phone calls. In fact, it can be done in a single 10 minute phone call. That’s it - you’re done and ready to go. The cost is very low too at only about £15.
The only thing to bear in mind is what comes after: Director’s Fiduciary Responsibilities. This is the paperwork that comes with being a director. It can be difficult, but the money you save from going incorporated can often easily cover the fees for an accountant to take all of that on for you meaning you’ll hardly have to deal with tax paperwork again.
Better Borrowing Power
It’s not exactly a piece of cake to get a bank to lend at the moment and things don’t seem to be getting better. Having a company can help you with that though. You can establish a credit rating for your company meaning you can start with a clean slate. This is very handy for those who may have a bad credit history.
Increased Employability
It’s a certain yet unfair fact, that a company carries more weight behind it than a single person. That “LTD” at the end of your name can have an impact when you’re applying for jobs. It can also help with convincing potential clients and companies of your professionalism.
Limited Liability
By going incorporated, you give yourself some protection as well. If the worst happens and you were to go bankrupt, your personal items would be at risk. Instead, if your company goes bust, everything separate from your business is safe. It’s not an eventuality you want to worry about, but it’s always good to know you’re protected.
These are some benefits of going limited. You can setup a limited company on your own. However, we strongly recommend to consult or seek advice from an industry expert.
As a specialist Contractor site ourselves, we can help you in forming your very own limited company. So that, all you need to do is, focus on your core job; which is Contracting.
Article Source: Crunch Accounting
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