New businesses can be classified into three types. These are partnership, sole trader, or limited company. Each one comes with advantages and disadvantages. The limited company though is a popular option among those who wish to grow the business significantly, as well as protect their personal assets from any liabilities.
To start one, a person must register it first. Those who choose to have a limited company must be prepared to work on more paperwork and accounting tasks, in comparison to the other types of businesses. The upside though is that limited companies have better protection against financial liabilities.
A limited company can have assets and properties. It also can acquire debts, can get sued, or can also sue. It is also interesting that limited companies’ finances are separate from the owner’s personal finances. So in case the business gets into financial trouble, owners are not responsible for the debts.
When it comes to ownership, shareholders of a limited company have equal shares. There can be one owner who will be the sole shareholder or there may be more than one shareholder.
Does a limited company have advantages?
The advantages that come with a limited company are these:
- Debts, legal action, or liabilities are limited to the company. Owners are spared from bankruptcy in case the business does not fare well.
- Owners of limited companies can hire staff and pay salaries using the Pay As You Earn (PAYE) scheme.
- Corporation taxes on profits are lower in comparison to income taxes of sole traders.
- Selling of a limited company is faster and easier should the owner want to part with it.
- Limited company shares are easier to sell which helps bring more capital.
- Limited companies are more professional as an organization and can be bigger. This is beneficial should the business transact with government organizations, or other companies or business.
How are limited companies set up?
Those who wish to set up a limited company should decide what kind it would be. There are two options – Private Limited Company (LTD) and Public Limited Company (PLC). Those who choose an LTD are usually small businesses, startups, freelancers, and contractors. This is because PLCs must have £50,000 as minimum share capital. PLCs also must have at least two shareholders and two company directors, plus one company secretary.
Next thing to do is choosing the business name which is unique and should make the business stand out from the competition.
The third step is tricky but is easy for organized individuals. Companies House would ask for the company director’s personal details. The information would be used by Companies House to register the business which would take just a few hours. After the application is processed, the company director would be the official owner of the business.
It is also important to complete the incorporation process. Information on this can be found on this website. Companies House would ask for documents like the Memorandum of Association, Form 12, Articles of Association, and Form 10 - and all these should be submitted for a successful processing.
Does setting up a limited company cost money?
To register a limited company, a business owner should sell out £40. There are services offered by companies to help company owners set up the limited company via digital services. This can cost £12 and those who wish to use such services must prepare all necessary documents for registration. The company for registration must have share limits and must have standard articles of association. By using such services, companies can be registered in under 24 hours.
By following these steps, a limited company can be set up easily. All necessary documents should be ready beforehand to make things faster. Company Address can help out with their formation packages.
published under Starting a Business
