A limited company is a type of incorporation where the owners and investors have limited liability. The liability of the shareholders is either limited to their shares or guarantee. It merely means in case of any uncertainties and the company cannot pay its debt, the lender in question can only recover the money owed from the shares invested or guarantee.
The business structure is a separate entity from the owners, and it allows them to protect their finances or assets. It offers protection to the shareholders if the business fails as all the debts will be settled by the company rather than the owners. You can opt for to guide you in the startup stage of the limited company.
The top 5 reasons for opting for this business structure include:
As stated earlier, as the company owner, you will not be liable to settle any business debts. For other types of business structures, such as the sole proper worship, the business owner will have to pay the business debts using their finances and assets. Setting up a limited company protects your personal financial interests.
A separate entity means that a company stands on its own, and it’s different from the owners. The company can be sued or can sue on its own. The business can also acquire property and make contracts on its own, and it’s liable to settle all debts. The concept protects the shareholders and directors from the law in case of any uncertainties. In case of any wrongdoing in the business, the law will not hold the specific shareholders accountable but will sue the company. The only attachment you have with the company is the shares invested.
Forming a limited company is a professional and modern way of conducting business activities. A company creates a professional image of your business as it is officially registered. Such a business is likely to attract more investors than other forms of business structures. With a limited company, it is easier to get financing from financial institutions as they view your business as a more secure entity. Also, the status of limited companies adds value to the credibility of your business. Some agencies and companies prefer to work with registered companies due to the risks involved. You will better be positioned to contract and hire professionals in a limited company rather than a sole propertioship.
Limited companies enjoy low corporation tax on their profits than the sole traders. It means the company will enjoy higher returns than the sole proper worship. Also, shareholders and directors can take their earnings in the form of salaries and dividends. Such a strategy allows a reduction in the amount of tax the company pays. The sole proprietors don’t have that option, and they are forced to pay a specific percentage of income tax on all their trading profits. Lastly, they are numerous benefits of registering your business as a limited company. You will be able to protect your finances, enjoy lower taxes, and form a profitable business entity.