Starting own business – UK

One thought on “Starting own business – UK”

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  RCadmin

  March 8, 2025 at 2:09 pm

  Hi there,

  Congratulations on considering starting your own business! Both options—setting up a limited company (Ltd) and becoming self-employed—have their pros and cons, and the best choice depends on your specific situation and goals. Here are some points to consider for each:

  Limited Company (Ltd):

  Pros:
  1. Limited Liability: Your personal assets are protected. If the business incurs debts, you are only liable for what you invested in the company.
  2. Tax Efficiency: Potentially lower tax rates compared to self-employed income, especially if profits are retained in the business.
  3. Professional Image: Having an Ltd can lend credibility to your business.
  4. Investment Opportunities: More options for attracting investors or partners.

  Cons:
  1. Administrative Burden: More paperwork, including filing annual accounts and corporation tax returns.
  2. Costs: There are costs associated with setting up and running a limited company, including accounting fees.
  3. Complexity: Managing payroll, dividends, and other financials can be more complex than being self-employed.

  Self-Employed:

  Pros:
  1. Simplicity: Easier to set up and manage. Less paperwork and straightforward tax returns (self-assessment).
  2. Immediate Access to Earnings: You can keep all the profits generated immediately.
  3. Lower Costs: Generally cheaper to set up and maintain in terms of administration.

  Cons:
  1. Unlimited Liability: You are personally liable for any business debts, which puts your personal assets at risk.
  2. Higher Tax Rate: Profits are taxed at your personal income tax rate, which can be higher compared to corporate tax rates.
  3. Perception: Some clients may view self-employed individuals as less credible than limited companies.

  Recommendations:

  1. Assess Your Business Model: Consider how much revenue you expect initially, your growth plans, and the nature of the work you intend to do.
  2. Consult an Accountant: It can be invaluable to get advice tailored to your situation. An accountant can help you understand tax implications and set up the best structure for your needs.
  3. Start Simple: If you’re unsure, starting as self-employed may allow you to test the waters without too much initial commitment, and you can always switch to a limited company later if needed.

  Ultimately, the decision should align with your long-term goals for the business. Good luck, and feel free to ask more questions as you navigate this journey!