Advantages of a United Kingdom Company
Naysayers will find it hard to dismiss 3E Accounting’s quick read on the advantages of a UK company.
In these uncertain times, entrepreneurs are understandably cautious in venturing into any business. Yet, in the United Kingdom, it’s business as usual, despite a global pandemic and Brexit. Entrepreneurs and investors alike see the advantages of a UK company clearly. From a competitive tax regime to easy company formations, there’s really no reason not to start a UK business.
The British Enterprise
Sole traders and limited liability companies are the two most popular vehicles for doing business in the UK. While a sole proprietorship does have its merits, the limited liability company has more going for it than not. Incorporating a limited company can be done within a day at Companies House, and fees are relatively minimal.
A limited company’s most significant advantage is that it is incorporated and acquires a separate legal identity status. This feature of UK companies confers a safety element for its owners and shareholders as it limits their liability. As such, they will not be personally liable for the business’ financial losses. Having a separate legal identity also means that the company has its own bank account, can enter contracts, own property, etc.
Limited companies in the UK have a legally independent existence. Its name, for instance, is unique and registered with the Companies House. Shareholders and directors can come and go, but the company has the potential to exist in perpetuity. Succession and legacy issues can be planned and managed, making the transfer of ownership easier. If the business is not a registered limited company, succession is not a viable option. Further, unless your company’s name is registered as a trademark, anyone can make use of it.
A separate legal entity status also makes it more viable for limited companies to secure funding. Banks and institutions view limited UK companies more favourably than partnerships and sole proprietorships. Expanding on this, limited companies tend to project a very professional and prestigious business image. This makes it easier to do business with larger corporations and multinational companies (MNCs).
Raising capital can be done by issuing shares in your limited company. In the case of a public limited company, shares and debentures can be publicly issued as well. The share class is also variable as some shares, such as preference shares, are more valuable. Preference shares allow a company to raise more capital without diluting the shareholding.
Probably the biggest and most enticing advantage is the United Kingdom’s taxation regime. Limited companies in the UK pay corporation tax, which is currently set at 19%. Personal tax, on the other hand, is relatively low. The director of a limited UK company can choose how to get compensated to take advantage of tax exemptions. Hence, directors can get paid the maximum amount not taxed for the year and opt to get the rest in dividends.
In the UK, dividends that fall within the remit of Personal Allowance are not subject to taxes. There is also no need to contribute to the National Insurance Contributions (NICs) on the dividends. Conversely, sole proprietors have their entire income subject to tax and need to follow NIC rules strictly.
These factors should be sufficient to convince any savvy entrepreneur on the advantages of a UK company. To get started on the right note, get in touch with 3E Accounting. We provide multidisciplinary services across various areas to ensure your entrepreneurial journey is as seamless as possible. Working synergistically with our global partners and affiliates, we offer customisable business solutions that are innovative and affordable. Contact 3E Accounting today and begin your entrepreneurial journey with panache.