So, you’ve proven that you can make an actual living from being a social media influencer: you’re earning more than decent money, and you’ve turned your passion into a viable business. That’s amazing! But what should you do next? Continue as is, or look to expand your business and personal brand? One of the ways you can do this is to incorporate your organisation as a limited company.
What actually is a limited company?
Limited companies are companies that have been incorporated at Companies House as a separate legal entity. This means that the company is legally separate from the people who run it, and the company’s finances are separate from the owner(s) personal finances.
What is Companies House?
A limited company is a company ‘limited by shares’ or ‘limited by guarantee’. Limited by shares companies are usually businesses that make a profit, and has shares and shareholders who can keep any profits made by the company (after tax has been applied).
Limited by guarantee companies are usually ‘not for profit’. These companies are also legally separate from the people who run them but have guarantors and a ‘guaranteed amount’ and invest profits made back into the company.
Why should I incorporate my business?
There are many benefits to becoming a limited company, and they fall under three categories: financial, risk, and reputation. Let’s take a look.
Financial
- Business insurance premiums tend to be cheaper for limited companies, as these businesses are viewed as having more clout or longevity.
- You keep complete control of your financial affairs meaning you do not have to risk your money with any third-party administrator or umbrella company.
- Anything that is solely classed as a business cost can be claimed back on expenses. Trading through a limited company means you can claim on a wider range of expenses such as accountancy fees, equipment, software, phones, travel, internet and much more. Where sole traders pay 20% to 45% income tax on all taxable earnings, owners of limited companies pay a flat rate of 19% corporation tax on their profits. And this 19% can be lowered substantially through dividends and expenses.
Risk
- One of the biggest advantages of a limited company is that the owners or shareholders aren’t fully liable if someone takes legal action against the company (or if the company becomes insolvent). This offers you a huge security advantage in that your personal assets are protected; as a shareholder you cannot be held personally liable for the debts of a limited company, meaning your personal assets are not at risk.
- As a non-limited business (ie, sole traders), personal assets can be at risk if the business fails, or the company is sued. If you’re a sole trader, your business operations are linked to you as an individual. If you are overrun with debt or legal woes as a sole trader, there is no escaping those liabilities: you’ll personally be on the hook for every penny.
Reputation
- Operating as a limited company often gives suppliers and customers a sense of confidence in a business and sometimes other companies prefer not to deal with non-limited businesses. Using a limited company structure increases the legitimacy of your business, and provides you with a more professional image to external customers and suppliers.
- Incorporating your business also offers some brand identity protection. Once your proposed company name is registered as a limited company, the name is protected by law and no one else is allowed to use it. Waiting to register your company could mean you lose the name you had initially wished to trade under.
So, there you have it: some great reasons to think about incorporating your company.
At Broadwing, our clients come from a wide range of businesses including media & entertainment, influencers, and tech startups. We specialise in outsourced accounting for small to medium-sized businesses, personal & corporate taxes, business systems and solutions.
To learn more about the advantages of becoming a limited company, and whether the time is right for your business to incorporate, get in touch with us.
Tel: 01604 328328
Email: [email protected]
