A private limited company is a common business structure for freelancers. It creates a separate legal entity distinct from you as an individual.
What is Private limited company?
A private limited company is a business structure that is legally separate from its owners. It is owned by shareholders and run by directors. For a freelancer, this means the company itself is your business entity, not you personally.
Why is this important?
This structure is crucial for freelancers seeking to protect personal assets and scale their business. It provides a formal framework that can make you appear more credible to larger clients. It also changes how you handle taxes and finances.
How does it work?
You register the company with the relevant government body. Once formed, the company enters into contracts, invoices clients, and holds bank accounts in its own name. You typically act as both a director and a shareholder, paying yourself a salary or dividends.
Pros and cons
Key advantages include limited liability, where your personal assets are protected from business debts, and potential tax efficiencies. The main downsides are increased administrative work, compliance costs, and more complex accounting requirements compared to sole trading.
Conclusion
Forming a private limited company is a significant step for a growing freelance business. It offers protection and professionalism but comes with added responsibility. Consider your income level and business goals before deciding if it's the right structure for you.
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