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Limited Liability First and foremost, the principal benefit of trading via a limited company has always been the limited liability bestowed upon the company's officers and shareholders. As a sole trader or other non-limited business, personal assets can be at risk in the event of a failure of the business, but this is not the case for a limited company. As long as the business is operated legally and within the terms of the Companies Act, directors or shareholders personal assets are not at risk in the event of a winding up or receivership. And as often happens on occasion, such events are not always under our own control. Operating as a limited company often gives suppliers and customers a sense of confidence in a business. Quite often, larger organisations in particular will prefer not to deal with non-limited businesses. Many of the costs associated with managing and operating a limited company are no longer much greater than with a non-limited business. In general terms, at least from the perspective of taxation, changes to legislation over the last few years have meant much lower costs associated with limited companies. There is no obligation for a limited company to commence trading within any set time period after its incorporation. This means that the formation of a limited company is one simple and low cost method to protect a business name. Whilst this does not in itself give any rights to use of the business name, many clients form companies in anticipation of future development of new businesses or in order to protect the limited company name of an existing non-limited business for the future. No two limited companies can exist with exactly the same name. If a limited company becomes insolvent and is wound up only the assets of the Company are used to try to clear its debts. The Officers of the Company have no personal liabilities, and are not made bankrupt, and are free to form another company. However, the shareholders are liable only to the extent of any unpaid shares held. By contrast, if you trade as a partnership or as an individual, the creditors can claim on all your property to satisfy the debts, and if this is insufficient you may be declared bankrupt. An undercharged bankrupt is forbidden to start another business or to become a director of a limited company. Maximising the Benefits of a Limited Company - Tax Benefits One of the main focus for small businesses will be the maximising benefits to minimise the Deemed Schedule E payment. This can be done by:-
Other considerations are :-
Raising Finance A limited company has an advantage of raising finance by selling issued shares to investors. The value of a share depends on the viability of each individual company, and not the nominal value of a share. It may also raise finance by means of overdrafts, debentures and loans. Continuity of Business The death or resignation of any officers of the Company does not affect the structure of the Company, which may continue to trade as before. Any shares held by them may be passed on to the others. Protection of Business Name Registration legally protects the Company name against anyone else forming a similarly named limited company either in sound or spelling. Name of the Company The Registrar of Companies will not under the Companies Acts, register a name where it is the same as that of an existing company. However, a company may be incorporated with any name that is not considered undesirable by the Registrar, but may not without consent, include words such as Royal; Bank; Board; International; Group; National etc. Other words may not be allowed if they imply connections with government bodies or other established institutions such as Chamber of Commerce, Insurance Brokers, Architects etc. We can carry out a free company name-check for you if required. Or click here to see if the company name is available: http://www.companieshouse.gov.uk/info/ Directors & Secretary A limited company must have at least one Director and one Company Secretary, they are known as the Officers of the company and are responsible for the management of the company. The officers of the company must act in good faith, responsibly and in the interests of the shareholders. There need only be one director. However, a sole director cannot also be the company secretary. There is no restriction on the number of directorships and secretarial positions an individual may hold, nor are there any restrictions on the nationality or residency of the directors or secretaries. Registered Office All companies by law must have a registered office in the country of its incorporation. It is a place where the company’s statutory records are maintained, and is the place where any legal notices are served on the company. Memorandum & Articles of Association These are the rules and regulations which form the legal basis for the conduct of the company amongst its shareholders and directors, and with third parties. The Memorandum of Association must state the name of the company, and in which country its registered office is situated. They also include the amount of authorised share capital, the number of shares that are to be registered, and the classes of the shares. The Articles of Association govern the internal affairs of the company. Company Stationery The company must show on all business letters, invoices, written orders, receipts and demands for payment the name of the Company, registration number, company’s country of incorporation, and the registered office address. This information should also be displayed at the registered office and in premises where business is carried on.
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