Setting up a limited company is not always the first step to start a business.  Many people decide to incorporate their existing business to take advantage of the benefits gained through operating as a limited company. There are many reasons why someone may choose to do this, however some of the general reasons are:

Selling on the Business

Some people will gradually develop a business that is very successful, but then may wish to sell it. Selling the shares of a limited company to a buyer is much easier than trying to sell the individual assets and liabilities of the self employed business.   Selling a business that has no separate legal entity is notoriously difficult.

Limited Liability

Forming a limited company means that as a shareholder you would then have limited liability, under normal circumstances, for the debts of the business.  This means that your personal wealth is not at risk, like it would be if you operated a self employed business.  As your business expands you may have more risk if you undertake more valuable transactions or transactions abroad.  Having limited liability may protect you if this is the case.

Image

As your self employed business grows you may want to incorporate as this does often have image benefits.  Customers and suppliers that you deal with tend to be more comfortable engaging with limited companies

Tax and Cost Savings

As the level of profit of your self employed business increases, the relative cost of administration of running a limited company may decrease.  Also in some cases, increases in profit may mean you are able to make more tax savings than you would when being self employed. In these instances you should seek advice from a professional, such as a Chartered Accountant, to see whether it is beneficial to proceed with a company formation in your specific circumstances.

For more information about converting your self employed business into a limited company visit www.wisteria.co.uk or call 0208 952 0140.

Alternatively you can complete your limited company formation online with Wisteria Formations here: www.wisteriaformations.co.uk