A limited or umbrella company? - By: Gen Federico

Starting a limited company means that you will probably end up taking a small salary from the company each month, making up your salary with dividends - which are the profits of a company after paying tax. These are distributed to the shareholders with the amount dependant upon the percentage of the company owned. As dividends are taxed at a lower rate than Pay As You Earn income, and do not attract National Insurance payments, this can be very profitable. As a company director you have some legal responsibilities to ensure that you are fully compliant with HMRC. It is usual to have an accountant to deal with all the paperwork and legislation as it can be very confusing.

An umbrella company is, in effect, an agency who supplies work for you with another agency or client. You are treated as an employee and therefore pay tax and national insurance under the Pay As You earn rules. Your umbrella company will pay you after deducting the necessary amounts for tax and insurance.

In the year 2000, legislation was introduced that became known as IR35. This was introduced to ensure that a contractor working through his own limited company would pay the same tax and national insurance as an employee working for an employer or agency. Taking into account the new legislation many people have to decide whether to become a limited company and risk falling into the area covered by IR35, or to choose an umbrella company.

To decide whether to start a limited company you would have to decide whether your contract would fall into the area of IR35. If so you may be better off with an umbrella company. How long will your contract be for is another consideration as an umbrella company offers a hassle free contract.

Here at Churchill Knight we specialise in limited companies and can offer you advice with regard to the IR35 legislation.

About the Author

The Article is written by churchill-knight.co.uk providing Umbrella Company and Limited Companies Services. Visit http://www.churchill-knight.co.uk for more information on churchill-knight.co.uk Products & Services___________________________Copyright information This article is free for reproduction but must be reproduced in its entirety, including live links & this copyright statement must be included. Visit churchill-knight.co.uk for more services!

Article Directory Source: http://www.articlerich.com/profile/Gen-Federico/63813

Additional Articles From - Home | Business | Management