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A limited company is one of the most popular business structure in the U.K after ‘sole trader’.Over three million limited companies have got their business registered with the Companies House in 2017/18.
A Limited company is a form of company where the business owners keep their assets and finances separately from the business. This means that the persons who have invested in the business are accountable to the business debts upto the amount they have invested. In this way, company gets a good investment where the shareholders are personally protected without risk to their personal wealth.
Therefore, a limited company is perceived as an entity in its own right based on legal action. As a distinct body, a limited company can also be the director of another company.
Limited company has various advantages to offer:
Every limited company looks for a financial security for the smooth running of a business. Since there is no personal liability for business owners and all their acts are rendered by the agents for the company, in such instances the shareholders will be accountable for any debt which the company incurs. However, the court imposes the liability on those businesses which are engaged in fraudulent trading.
As the nature states, a limited company appears to be an independent legal entity from its owners. The life of the company won’t interrupt if any of the members retire or die, that means the company will continue to operate and exist longer. This also confirms the security of employees and other members and this advantage can easily be seen in limited companies and no other legal forms of business.
The Directors are the main shareholders of the Private Limited Company. Hence, both the ownership and control of the business lies in this own hands. Decisions are made easily with a little fuss, which allows for a more successful platform for managing the business.
Upon registering successfully as a limited company, your company name is protected by law. The strict rules of the companies House for the naming of companies--- protect your company’s name from getting copied.
Trading your business as a ‘limited company’ can give you a more professional image.
Employees can buy shares (or get shares via a company’s share scheme) to become shareholders of the company. Don’t you find it good? Yes, that’s a good approach to rewarding the employee’s for their work, giving them extra motivation which goes beyond just earning a salary. Not only this, employees will have a vested interest in seeing the business succeed, but they will also have a say in how the business should run.
20% on earnings above the personal allowance and up to £46,350. 40% on earnings from £46,351 to £150,000.
Get the real benefit of tax benefits by paying yourself in dividends instead of getting fatty paychecks.
Besides advantages, a limited company has certain drawbacks too:
Starting your own limited company can initially prove to be pricey but over a period of time, it appears to be worthwhile when you are an eventually a successfully established limited company.
The profits which your business makes will be accountable to pay corporation tax on it. If your business makes sufficient profits, whatever you save in personal taxes could go to HMRC in the form of higher corporation taxes. The calculation and annual payment of the corporation tax are subject to your ‘corporation tax accounting period’ which is often the same as your company’s financial year.
You need to be ahead of already existing administrative things to take care of as a limited company. This consists of expense details, tax returns and your business accounts. These are required to be completed every month.However, there is every solution for your enormous document overload. You can look to hire an accountant that can save your time and money while you concentrate on your other business chores.
It is the Companies House where all business houses publish their accounts which consists of the Corporation Tax details and also furnish a business address. This means that all the financial reports and annual accounts will be stored in the public domain.For sole traders who are working under a business name may not be wanting this information to be declared publicly.
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