Pros and Cons of Starting a Limited Company in the UK
Published on September 1, 2019
What is VAT and how do I register
A limited company is among the most widely used business models in the present day world. This is primarily because of a number of benefits it offers over other business models. Below we’ve given an overview of the pros & cons associated with starting a limited company to help you make a better decision.

Pros of a Limited Company:


Investors can be more inclined towards taking a risk on limited firms since their investment is likely to have more protection as compared to a partnership or sole trader.

Also, the investor’s accountabilities are also restricted to their shareholding when it comes to a limited company.


As long as there are no unexpected clauses in the company’s articles or shareholder’s agreement, transfer of shares in a limited organisation is normally easier & also more convenient as compared to the one in a sole trader or partnership.


Banks are likely to prefer limited firms & they’re provided with a chance to take out additional security by lodging a ‘floating fee’ over the assets of the company.

Meaning, in case the terms & conditions of the finance are breached for any reason, the bank will have the first claim over the assets.


For a limited firm, the dividends aren’t subject to national coverage & are at a reduced tax rate than self-employment income.

Effective tax rates

People who intend to retain some of their profits within their business can enjoy reduced tax rates on limited firms.

Cons of a Limited Company:


Banks may still need personal assurance from the directors. Meaning, the directors may still be held accountable for the debt of the company.


Directors are also required to send statutory documentation to the Companies House. Hence, those who fail to do this might be charged with late filing penalties & may also be deemed to have committed a criminal offence


When you become a limited organisation, your accounts along with other details are likely to be held on public records. As a result, anybody including your competitors is able to access company info, even though it might be restricted.

Accountancy charges

One expense which is likely to be higher when it comes to limited companies is your accountancy fees since the reporting needs tend to grow bigger.

What Is A Confirmation Statement And How Do I File One?

What Is A Confirmation Statement And How Do I File One?

You can use the internet or postal service to file a confirmation statement for your company.

Nonetheless, the online method is much simpler, faster, and secure compared to the post. Besides, it only costs you £13.00, compared to the cost of around £40 when sending it by post of around £40.00. Using the post also takes far longer.

Everything You Need To Know About The UK VAT Threshold

Everything You Need To Know About The UK VAT Threshold

It is important for a business to register for VAT provided that during the previous year their ‘taxable supplies’ (typically based on the turnover and not the profits) have surpassed the threshold for VAT. This is applicable to all businesses in the United Kingdom, no matter whether you’re working as a limited partnership, company, or sole trader.

Ready to get started?

Share This