As a business owner in the United Kingdom, you essentially have two options when it comes to your business identity. You can run a sole trader operation — the classic one-person band — or you can establish yourself as a business entity by registering a company name. 

There are valid arguments for both camps, but in many ways, becoming a limited company (LTD) is superior to being traditionally self-employed. In this article, we’ll look at six of the most important reasons to develop your business as an LTD: 

Register a Company Name and Protect Your Branding

A registered company is a protected entity. Your business name cannot be owned by any other UK organisation or business once you have registered it with Companies House. This becomes a powerful method of securing your branding. 

Not only does it mean you get the right legal protection and ownership of your business name, but it also means you are protected against having to go through a costly re-branding process.

If you were to maintain the status of a self-employed individual, there is the potential that your business name could be taken and registered by another commercial entity.

In doing so, they achieve the rights to the name. In this circumstance, it doesn’t matter how long you’ve been operating under your business name; you may be forced to change your branding to avoid legal complications. 

Inspire Confidence in Investors and Clients

Being a registered business might not change the product or service you offer, but it can change the perception of them. 

In many ways, registering a company is like getting married. It is a legal milestone that cements a commitment and places institutional ties that cannot be so easily broken. What it shows is dedication and devotion to your new company; it shows a personal investment in its success. 

This kind of development can demonstrate to investors, clients and others that you are firmly committed to your business and inspire the confidence they need to get on-board. It shows an element of professionalism you simply cannot acquire through being self-employed. 

As with many aspects of successful business, it all boils down to status, reputation and outward perspective. What are you more likely to take seriously? An independent sole trader or an established limited company? 

They may do the same thing, but one certainly does sound more appealing than the other, and when it comes to attracting others to help your business grow, being an attractive prospect is key. 

Gain Liability Cover and Secure Your Financial Future 

As a self-employed individual, you are liable for all costs and expenses of your employment. This means if something goes wrong, the financial burden falls entirely on your shoulders. 

Debts incurred by your business venture, for example, become a personal burden. Significant debts mean you stand to lose savings, personal possessions and even your home.

This is not the case, however, if you operate as a limited company. The “limited” in “limited company” represents limited liability. This is a protection method that exists to put in place a financial buffer between the business and its owners, employees and shareholders. 

The best way to explain this concept is to consider that when you register a business, it becomes its own entity, whereas as a sole trader, you are the business. For a limited company, any debts wracked up by the business are beholden to the business and not any one individual associated with it. 

So does this mean you can set up a limited company, spend money through it, build serious debts and then just disappear and start all over again? 

No, of course not. 

This is illegal and fraudulent activity, and you as the perpetrator would still be held accountable. What is does mean, however, is that if you were to register a company and carry out acceptable practices of trading but were to see financial difficulties, the problems would be confined to the business and your personal assets would not be threatened.

The business may collapse and the assets owned within it lost, but your property and finances remain secure. 

Access More Stable Tax Payment Methods

As a self-employed individual, you have to manage your tax payments through annual self-assessments. For some, this can be difficult, and you may find you have insufficient funds to cover your tax bill when you submit your returns. 

But did you know that by registering as a limited company, you can support better tax management through access to PAYE?

PAYE (Pay as You Earn) is a system available to companies registered with HMRC. You cannot access PAYE if you are a sole trader. It works by acquiring the status of an employer business with payroll.

Through this, you can establish PAYE on your taxes and make direct payments to HMRC on every paycheck you take from the business. This way, you don’t have to worry about saving up for annual returns, as tax is taken incrementally during every pay period. 

You don’t need other employees to set up PAYE either. You can be the only member of your business, and the only employee of the business, and still access PAYE. All you have to do is register your company, register as an employer and then pay yourself an employee salary, subtracting tax through PAYE. 

Acquire Devoted Employees and Grow Your Business

Registering a company doesn’t just mean you can employee yourself — it means you can employ other people, too. 

As a sole trader, you are unable to make dedicated hires, which often results in your business being supported by other self-employed workers or businesses. There are plenty of advantages of working with contractors, from less hassle with legal obligations to easier tax management, so why are we listing the ability to secure employees as a benefit? 

Put simply, there is one major reason why being able to hire employees is important for your business: dedication. 

Other sole traders or third-party organisations are not dedicated to your business; their career is based on the success of their own business, not yours, which means they are liable to seek out new opportunities.

An employee, by contrast, is a devoted individual who works — often exclusively — to help you achieve your goals. As a business owner, you maintain higher levels of control and influence over their work, with the ability to direct them in ways you cannot a self-employed worker.

As their financial security is also based entirely around your success or failure, they’ll also be more driven to develop your business.

Craft Your Legacy 

Consider your business a great kingdom, and you, its esteemed monarch. One day, your reign will end, so where do you want your company to go after that?

If you want to carry on the line of succession, build your legacy and have your brand evolve and develop after you are finished with it, registering as a limited company allows you to do that. Your business becomes its own figure, which means another can take up the mantle and move forward. 

If your dream is to be remembered in the history books as the founder of a company that, one day in the future, will have been running for hundreds of years — imagine a regal oil painting of your profile hanging in the lobby — you’ve got to first establish it as an entity that can stand the test of time.