Limited company vs Sole Trader. What to choose? Do you know the main benefits of operating as a Limited Company? Read the article to learn more:
Benefit 1: Separate Legal Entity
Unlike a sole trader, 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. This means that if the company becomes insolvent, owners or the shareholders are not responsible for the bankruptcy.
Benefit 2: Tax Benefit
By running your business as a limited company, you may perhaps have to pay less tax than as a sole trader. A limited company needs to pay corporation tax on the income or profit it makes. Whereas, a sole trader 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%!
Benefit 3: Limited Liability Protection
As the owner you have a ‘limited liability’ protection. Limited liability protection simply means that if the company runs into any trouble, your personal assets will remain safe.
Benefit 4: Funding
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 traders. If provisions allow, then a limited company can also raise capital via issuing of new shares.