A limited company is not only legally established, but is also regulated. This inspires confidence in the company from customers and potential investors and creditors.
As a limited company is seen as a separate legal entity it means the company does not live or die solely based on the management. If directorship or management change/leave the company will most likely live on simply under new management; thus not affecting the company. This offers security to employees and other members. Contrasting to a sole trader, if the director leaves the company will most likely not continue to operate.
In the event of your company failing your liability is limited. Therefore, you are not personally liable for the companies debts giving the advantage of protecting you personally from bankruptcy. Your maximum losses are only what you invested into the company; your personal finances and assets cannot be touched by creditors.
Corporate tax is quite often less than personal income tax, depending on sales revenue. Operating as a sole trader means you are subject to personal income tax which, once income is over a certain amount, means your personal income tax is higher than corporation tax. Forming a limited company subjects your companies earnings to corporate tax only, hence having substantial financial benefits as profit will be higher as a result of reduced tax payments. This is a benefit conditional on revenue being over a certain amount.
A limited company has access to both business loans and the ability to appeal for investment. In comparison to a sole trader, who must use personal loans and funds to finance the business, a limited company may apply for a business loan which banks are more likely to lend compared with personal loans. Combined with the limited liability associated with a limited company business loans are a good method of financing. Appealing to outside investment, for example angel investors, means financing options are available with no interest payments. The investor, in exchange for their investment, will take control of a portion of the company through share ownership. This easier access to capital often means business expansion is also easier.