As a freelancer, making the decision to make the leap from self-employed can be a scary choice. Knowing when the time is right and when you should make the leap isn’t always easy. Most small businesses are run by self-employed people, but there are some advantages of going limited company.

  1. Tax advantages. As a limited company, you’re likely to pay less personal tax than you would than if you were self-employed. Company profits are subject to corporation tax. You can pay yourself a small salary, and then earn more income from your shareholder dividends. This reduces the National Insurance Contributions, you have to pay, dropping your personal tax bill. 

  2. You and your business are legal separate entities. Anything that is in the company name, like a bank account, loans, credit agreements and any assets, are entirely separate from you and the other shareholders. With this separation, your personal assets are much safer if the business has a financial issue or needs to fold. 

  3. Limited liability protection. As a freelancer, you will currently be responsible for any business debts. With a limited company, you will have limited liability protection, which means that if the business borrows money, they pay it off, not you.

  4. Look more professional. Unfortunately, a limited company, however small, is likely to be taken more seriously than a sole trader. Having a limited company can improve your professional image. The more professional you appear to be, the easier it will be to build your customer’s trust in you and your products or services. Some companies don’t like to with sole traders or freelancer, so being a limited company could open more doors for you. 

  5. Better finance options. Getting funding for your business with business loans, credit agreements or financing arrangements can be much harder with a company. Limited companies have more options for securing finance, and a better chance of getting reasonable interest rates and terms of repayment from lenders. 

  6. Register your business name. When you set up as a limited company, the name of your business gets registered with Companies House, which means it goes on the register of companies. When your name is registered, it is automatically protected under UK law. This means, nobody can use your name to trade under. It also means that nobody can trade under anything too similar to your business name either. Nobody will be able to undermine your business by luring customers away, confusing them, or damaging your reputation by trading under the same or a similar name. 

  7. Business costs. Many of us assume that forming a limited company is expensive to do, but it can actually be done very cheaply and easily. You can do most of the work online yourself, with a specialist company, with no need to spend money on legal help. Someone like Your Company Formations Limited will have a team of experts who can help you get everything ready to take your business to the next level. 

  8. Shareholders. To set up a limited company, you need to have at least one shareholder. This can be you, meaning you can set up your company with yourself as Director and company shareholders. Later on, you might want to bring in more shareholders to bring some cash into the company. 

  9. Pensions. Anyone who employs staff needs to offer a pension scheme of some kind. As a sole trader, you are responsible for this. As a limited company, you can fund your executive pension and claim it as a legitimate business expense. This gives you a great tax advantage, which you wouldn’t get if you stayed as a freelancer. 

  10. Legacy. What happens to your business when you’re gone is a concern for any business owner. If you were to have an accident and die or be left unable to work, what happens to your business? As a sole trader, this could be devastating, with nobody to take over. As a limited company, you can build in plans to transfer company ownership in the case of your incapacitation or death. When you retire, you can sell your shares to other shareholders or your family, with the knowledge that your business can continue to grow and thrive without you. 

If you’ve been working hard as a sole trader, and have managed to build a successful business, registering as a limited company could be the next natural step to allow your business to keep on growing. Future proof your hard work and protect your company for years to come.