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Why Company Formation Is Considered A Better Alternative For Contractors

By Louie Beckingham

Company formation is probably the best option contractors can do to execute their business. Contractors, who are freelance individuals who work on a particular project for companies on a fixed term, may see themselves with no clients if they don’t have a company to stand for them because big organizations opt to work with other companies and not individuals.

Some contractors choose to find work through umbrella companies to remedy this situation. Umbrella companies basically act as an agent of the contractor, with their primary role is to find work for them from big companies. They bill companies for the work of the contractors, while they charge contractors for the work they acquired for them.

Umbrella companies undoubtedly help individuals find and get work, but they also take away some of the profits contractors receive from companies.

Company formation is another choice contractors can take. If they have their own company, they don’t need to depend on umbrella companies to get work. Company formation lets contractors get larger share of the earnings because they can pay themselves in shares.

Implementing a company formation is subject to a reduced tax threshold. This is because the contractors, or the business owners, pay themselves shares as opposed to a wage system if they are registered as freelancers.

Other pros of company formation for individuals are safety and protection. A private limited company is a distinct legal body from its stockholders and directors. Its existence does not rely on whether its owners walk out or stay so staff members under them can be sure that their company is not going anywhere.

If individuals choose company formation, they can easily be recognized by large organizations. Companies don’t acknowledge people, but they know other companies that do work for them. They don’t hire individuals, but they may employ the organization that a contractor is employed under.

Company formation provides contractors more security and protection than by simply depending on establishments to acquire work for them. A few drawbacks that it carries certainly do not outweigh the advantages it can bring.

Learn more information about Company Formation and Tax Advisory today.

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Article Citation
MLA Style Citation:
Beckingham, Louie "Why Company Formation Is Considered A Better Alternative For Contractors." Why Company Formation Is Considered A Better Alternative For Contractors. 10 Jul. 2010. 15 Aug 2014 <>.

APA Style Citation:
Beckingham, L (2010, July 10). Why Company Formation Is Considered A Better Alternative For Contractors. Retrieved August 15, 2014, from

Chicago Style Citation:
Beckingham, Louie "Why Company Formation Is Considered A Better Alternative For Contractors"

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