Another essential matter that often draws the attention of a limited company is to shift to an umbrella company. It is a crucial decision, and there are so many reasons to make the shift happen and that are supported by cogent reasons.
Top 5 Reasons to Choose Umbrella Company over Limited Company:
Too much administration involved with a limited company-
The very fact that you have complete control over finances and also have control and try to increase your pay retention that is one of the most critical factors that helps one in support of taking up the decision of going limited. However, at times, the same advantage turns to a bit hostile and short-lived as there is quite some hassle in maintaining the limited company. Still, the passion and zeal to run one's own business for others, and keeping track of all the legislation changes and administrative aspects may seem to be very time-consuming.
This could be a very significant aspect in considering the change. Once caught in IR35 could impose several tax penalties and in this situation, the better decision would be changing from a limited company to Umbrella Company. Also, if you fall under IR35, then there does not exist any financial or tax benefit that could persuade you to continue as a limited company. It will be then feasible to handle contracts under an umbrella to ensure that you do not fall under IR35.
Short term contracts-
If you desire to enjoy the flexibility of working short term contracts, then a limited company will be of no importance. There is enough time spent communicating with the accountants, HMRC, Companies House, and some of the other works like creating invoices, acquiring necessary documents, running bank accounts, and many other details.
Thus changing to Umbrella Company is a better option, as it does not require so many formalities. It is easy to join and leave the umbrella company; therefore, they are suited for short term or temporary commitments. They are also apt for the contractors who are concerned with the fact that one contract is self-contained and away from their usual arrangements.
Legal issues and tax liability-
In case of a limited company the contractor may find themselves getting stuck with a tax or legal issues, thus, in this case, the safest and the easiest way out is working as an umbrella company rather than a limited company. Also, the other benefit will be that shifting to Umbrella Company is easy and quick; thus, the contractor can continue to work as a contractor and at the same time, deal with these issues.
This is the most critical issue but then at times due to personal commitments and issues of a contractor he may wish to shift from a limited company to Umbrella Company. A limited company has such a design that it occupies most of your time and resources, and thus work-related stress is more, but with Umbrella Company, the contractor tends to get more peace of mind.
How can the shift be made from a limited company to an Umbrella company?
There are many reasons as listed above that would ask you to shift from Limited Company to Umbrella Company, and whatever the reason may be there is a procedure that needs to be followed to make them happen. There is a formal process to close down the limited company or to keep it on a formal process of a dormant company. In this situation, you need to take the help of your accountant or legal advisor for selecting the best option available to you.
This is one of the essential aspects that you need to consider before shifting from a limited company to Umbrella Company is that you need to find a trustworthy and transparent umbrella company. You need to careful while selecting an umbrella company for making the shift happen.
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