Top Benefits of Operating Business as a Limited Company

Top Benefits of Operating Business as a Limited Company

Are you operating your business as a sole proprietor? Have you ever heard or thought about Incorporating your business? There are great benefits of running as a limited company!

Starting as a sole proprietor is indeed the simplest way to kick off a business in the UK. To run as a sole proprietor, all you need to do is register with HMRC and inform that you are operating as a self-employed, and report all your financial activities through the self-assessment tax process annually.

Establishing the business as an incorporated entity or a limited company, on the other hand, involves a complex company formation process. Further, the administrative and financial responsibilities of functioning as a limited company are also greater than those of a sole trader. Despite the complexity and burden, operating as a limited company can be very beneficial for you.

Here are some of the notable advantages of functioning as a limited company:

Separate Legal Entity

Unlike a sole proprietor business, a limited company has an entirely separate identity from its owners. Ranging from the bank accounts to the ownership of various assets, everything belongs to the company and Separate from its shareholders’ interests. Even the debts and liabilities are in the name of the incorporated company, and the company itself is responsible for them. Hence, if the company becomes insolvent, Owners or the shareholders are not responsible to for the bankruptcy.

In case of a sole proprietor business, the business and the owner are considered as a single entity; hence, the owner is responsible for everything.

Tax Benefit

By running your business as a limited company, you may perhaps have to pay less tax than as a sole proprietor.

A limited company needs to pay corporation tax on the income or profit it makes. Whereas, a sole proprietor needs to pay income tax on the income or profit his/her business makes. The current corporation tax rate is 19%. And, the current income tax rate is 20-45%! You can see yourself how much less tax you will need to pay by functioning as a limited company.

Further, from a limited company, you as a director or shareholder can draw a salary as well as substantial income in the form of dividends. Both dividends and salary are taxed separately, so you will receive the maximum income while paying less tax.

Limited Liability Protection

By operating your business as a limited company, you as the owner get a ‘limited liability’ protection. Limited liability protection simply means that if the company runs into any trouble, your personal assets will remain safe. You will not be responsible for any form of losses made by your company because your company is a separate entity, as mentioned above, which is liable for its own losses.

In case of a sole proprietor business, the owner does not get any such protection. Therefore, whenever any loss arises, the owner needs to bear it all by him/herself.


Acquiring new funding these days can be difficult for all kinds of businesses. Nevertheless, since a limited company is entirely a separate legal entity, it could be a little easier for it to acquire funds than it is for sole proprietors. Most financial institutions trust incorporated entities more than sole proprietors.

Further, if provisions allow, then a limited company can also raise capital via issuing of new shares.

Professional Outlook

In some sectors, being a limited company can portray that the company has credibility and is dedicated to effective and sound management.

A limited company gives both the suppliers and customers a sense of confidence and most companies, especially big enterprises, will never prefer to deal with sole proprietors. For that reason, incorporating your business can be beneficial to create a professional outlook, which helps bring in new prospects.

Incorporating your business is not too expensive and difficult! Just get in touch with the experienced accountants for small business in London at Affinity Associates, and seek their incorporation/company formation services.

The skilled accountants for small business in London at Affinity Associates will help you not only with the company formation process but also with the accountancy for a limited company! Affinity Associates’ accountants for small businesses are vastly experienced and will take care of every accounting aspect of your incorporated or self-proprietary business.