Should I Register Self Employed or Limited Company
Setting up a small business comes with many challenges and decisions to make but one of the biggest decisions you might need to make is whether you register as self employed or as a limited company. We are local accountants near to you and part of a nationwide network of Tax Accountants in United Kingdom. We have listed some of the benefits but you should call us or email us and get advice about your personal circumstances.
Why Register Self-Employed?
When you start out as a business, becoming self employed might be the easiest choice. It will give you less to think about, enabling you to focus on running your business. Therefore, you won’t have to think about company law or filing annual accounts while corporation tax will be off your radar.
All you will need to think about is filing your self-assessment tax return, which will need to be submitted by 31 January. So, within three months of starting your business, you will need to register for self-assessment.
So, you will need to ensure that you keep all receipts and invoices as well as expenses safe as this will all need to be filed. While this might seem tedious, it is actually quite simple, especially if you use the services of accountants Birmingham. More so, it gives you the chance to spend time growing your business.
Becoming a Limited Company
Most businesses will start out life as self employed but if you have plans to keep your business going for more than 12 months then you might benefit from registering as a limited company. What’s more, it will also depend on how much you are earning and, in some cases,, a threshold of £40,000 is often a good marker to work to. However, you should make sure that you are going to turn over this amount or you are already turning over this amount.
Registering as a Ltd company comes with additional work in the form of administration. This means that you will need to have directors, register with companies house and complete company accounts while you will still need to submit your annual return. Along with this, you will also need to consider corporation tax as this is a serious aspect of becoming registered as a Limited Company.
Its always to best to ask professional accountant about the structure of the business and how much the services of an accountant would cost if you need one.
Despite the extra work, there are some benefits that come with being registered as a Limited Company. One of the benefits is tax savings. This is down to the fact that you can take a dividend instead of paying yourself a portion of the income from the business as you would do if you were self-employed.
However, one of the other benefits is that it will change the way in which you are perceived as a business. You can introduce yourself as a director while you will also look like a real company that is both professional and reliable.
If you are starting out, then registering as self-employed is more than likely the right choice. However, if you are going to grow or you are looking to establish yourself as a business with a large turnover then you should think about registering as a Limited Company.
So, if you find yourself in this situation then you should obtain professional advice from accountants Birmingham as this will ensure you make the right decision.
We as Tax Accountant Coventry always advice clients to call us before making any decisions. Talk to us about your business plans and we may be able to save you money on taxes in future.