Common misunderstandings
What the structure does - and does not - change.
Open one assumption at a time. The answer is usually more nuanced than the headline.
A limited company always saves tax
No. A meaningful comparison includes company profits, Corporation Tax, salary, dividends, benefits, directors’ loans, pension plans, other personal income, administration and how much cash is required personally. Rates and circumstances change.
Company money is my money because I own the company
No. The company is a separate legal entity. Money must be extracted or used through an appropriate route such as salary, dividends, properly reimbursed expenses or a correctly recorded directors’ loan.
A partnership protects the partners from business debts
An ordinary partnership does not automatically provide limited liability. Partners personally share responsibility for the business. LLPs and limited partnerships are different legal structures with different rules.
Limited liability means my personal position can never be affected
No. Personal guarantees, misconduct, duties during insolvency, inadequate insurance and particular legal or tax provisions can still create personal exposure.
I can split profits with my spouse or family however I like
Ownership, work performed, agreements, employment, shares and the settlements rules can all matter. Family involvement should reflect genuine legal and commercial arrangements.
Calling someone self-employed makes them self-employed
No. Employment status depends on the real working arrangements. A company or written contract does not automatically determine the tax or employment-law result.
GOV.UK employment status ↗VAT registration simply follows me into the new structure
Changing the legal entity can require a new VAT registration or a formal transfer. Contracts, invoices, bank accounts and the effective transfer date must align with the actual entity trading.
HMRC VAT-registration transfer guidance ↗I cannot change the structure later
You often can, but transferring assets, goodwill, property, employees, contracts, debt and VAT registration can have legal and tax consequences. Moving out of a company can be particularly involved.
I must appoint an accountant to run a limited company
There is no general rule requiring every private company to appoint an accountant. Directors remain legally responsible for the company’s records, accounts and filings even where professional help is used.