Umbrella and Limited Companies
One of the first steps in becoming a professional contractor is setting up or joining a company. Which can seem counterproductive to the ideas of independence and freedom encapsulated by being a professional contractor.
But, Independent contractors do need to use a company as a legal entity for two main purposes:
To register for tax and to invoice their clients.
They achieve these goals by registering with an Umbrella Company or a Limited Company. Both options come with a variety of pros and cons.
For example, an Umbrella Company allows a Contractor to start work almost immediately. Registering for a Limited Company takes up to 8 weeks.
On the other hand, a Ltd Company gives more freedom and flexibility in a contractor's tax obligations but requires the contractor to register and complete their own tax documents.
As a professional contractor deciding which system works best for you is an important first step on your new career path. Cpl are here to help you understand both options and to help ensure regulatory compliance isn’t a hindrance to your growing contracting career.