When joining the Aspray, our franchisees set up a limited company which provides many financial and professional benefits such as limited liability, tax efficiencies and professional status.
What is a Limited Company?
A limited company is a private company, whereby the directors are only liable up to the amount of capital they have personally invested. As with most aspects of business, there are both advantages and disadvantages to becoming a limited company.
Below are 5 benefits that our franchisees can take advantage of operating as a limited company:
Being the Director of a limited company gives you various options when it comes to salary and payments. What is said to be one of the most tax effective forms is to pay yourself a salary which will allow you to utilise your tax-free allowance. Your salary is deducted from company profits as an allowable expense, meaning corporation tax will only be paid in the remaining profits.
If you are a shareholder, you may also take dividends from the business, however, these can only be taken once you have calculated your profits in accordance with standard accounting practice.
Working from Home
Many Aspray franchisees operate from their home meaning they are often entitled to claim for associated costs. The company may pay a tax-free allowance to you to cover costs of operating from your home.
As a limited company is a separate entity, you may consider ‘renting’ part of your home to the company to operate from, therefore providing you with a rental income.
Assets and Invoices
Capital allowances, such as assets in the company name, may provide some tax relief for the company.
Similarly, any invoices should be made payable to the limited company, this reduces the chance of items such as mobile phones becoming a personal taxable benefit.
As registered company is rigorously monitored, they are seen to have a higher status than non-registered sole trader or partnership. Your company may have the same management and structure as before incorporation, however, your statutory compliance obligations become much greater, giving your company more credibility.
Brining in Family Members
Providing that the role is relevant, and the family member has the relevant skills to carry out the role, bringing on a family member can be an effective way of combating any tax saving issues you may have.
This information by no means covers all scenarios and is not meant to be taken in place of professional advice. Many points are subject to exceptions and caveats and professional advice should be sought before acting on any points provided within this article.