Has your rate of pay increased? Is your contracting career going to last longer than you originally thought? Are you ready for the challenge of running your own business?
If so, you might have outgrown the benefits of an umbrella company and it may be time to think about stepping out on your own and operating your business through a limited company.
Advantages of operating a limited company include:
Running your own business will give you complete control over your own finances; removing the risk associated with allowing a third party to handle your money.
Unlike an umbrella contractor the key business decisions are made by you and you alone, giving you the freedom to choose when and how much you pay yourself, plus the option of receiving dividends as a shareholder.
Most umbrella companies will have a restricted expense policy. Trading through your own limited company any business related costs can be claimed meaning you can claim for a wider range such as computer equipment, mobile phones, software etc.
Operating a non-limited company business puts your personal assets at risk in the event the business fails. Using a limited company, the business finances are separate from your personal finances, so your own liability is limited and your personal assets are safe.
Limited company status with a trading name offers you an extra level of credibility amongst both suppliers and customers alike and may afford you contract opportunities you may otherwise have missed.
Considerations to be made include:
As a company director, under law you will have certain duties to fulfil, giving you more responsibility than before. You will need to ensure that the company sets out to be a success, records are kept up to date and accurate information is filed on time. On a personal level you will be expected to complete an annual personal tax return.
To fulfil your director’s duties you will need to spend some time each month keeping records, making payments or signing documents. Whilst we can’t make payments for you, or sign your documents, we do have service plans to reduce the amount of time you need to spend on bookkeeping.
Generally speaking you should increase your personal earnings operating through your own limited company over an umbrella. This would be the case whether or not IR35 applies to any of your contract income. Take a look at our calculator to view a comparison.