Depending on your goals, there are several types of business entities that you can choose, when starting your business. From a sole proprietorship – a great option if you’re the only person in the business and if you don’t want to spend loads of effort to set it up, to a partnership which consists of at least two partners if you want to invest together and share profits together, to a corporation – a business model that we’re all familiar with. However, if none of these entities isn’t for you, there are more convenient structures to choose from such as – limited companies and cooperatives.
What differentiates all the before mentioned options are what happens to their owners’ assets in case of debts, claims for damages, and other problems. That said, corporations are great because their owner or owners along their assets are safe. If someone claimed a certain amount of money, the company would be responsible, not the owners. The same goes for partnerships and limited companies, while sole proprietorship doesn’t have their assets separate from the business – meaning that the personal assets of the owner are in potential danger.
All of this made people think and research the best solutions for their business, which is linked to their goals, and other factors. It doesn’t come as a surprise that limited companies slowly increase in popularity, becoming one of the most convenient solutions in the business world, and one of the most common ways to start a company in the United Kingdom. But, is there any explanation for this? What do you think?
It’s all about “the why”
A couple of millions of limited companies that were founded last year, testify that there’s a good reason for picking this structure over the others. The most obvious advantages compared to any other type of company is exactly why people pick a limited company as a form of investment – tax efficiency which includes reinvesting surplus cash and deferring the profits, limited liability – the safety of your assets, the individuality of your company thanks to the trademark, the opportunity of having a company pension, maximized tax-free income, great benefits linked to the corporate transparency, separate legal identity – the list is long. All of these reasons are just a glimpse of how modern solutions work in favor of the people who are willing to start their own businesses, with a better-structured approach.
Are private and public limited companies the same?
Private limited companies and public limited companies are not the same. Logically, a private limited company is owned privately, just like a sole proprietorship, with its shares held by people close to the owner and other private investors. A public limited company acts somewhat similar to a corporation, meaning that it can sell shares of its stocks to the public, on the stock exchange and it’s visible and transparent – meaning that it has to make financial reports available to everyone.
In both private and public companies, the liability is limited to only what their owners and other members have invested and it can’t hurt their assets. The main difference is the fact that after a private limited company makes some profit, they might want to switch to “public” to get more exposure, recognition or to lend money from the banks.
Before you start working:
THINK
There are a few steps you need to make in order to set up a limited company. Firstly, you need to make sure this concept fits your needs and meets your requirements. You also need to make sure that it aligns with your goals and the type of your business, which includes the way you pay taxes and get funding for your company’s needs. We also suggest talking with professionals about all topics that bother you. There are plenty of details you should take care of. Also, we suggest checking out this article and learn more about the importance of accountants for your business, visit fusionaccountants.co.uk.
FIND A NAME
It is crucial to choose a completely unique name for your business. What’s different about limited companies compared to the others is the fact that there are strict rules to follow. Not only is there a list of the names available, but there are also the existing trademarks as well. Do your research and make sure your name is not even a bit similar to someone else’s, send the trademark office action letter otherwise you can face some serious legal repercussions. There are also some words you mustn’t use in your business name which can be found in the government guide. Finally, the name has to have the word Limited at the end.
WHERE ARE YOU SITUATED?
Your company address has to differ from your personal one. Your personal address is the street name and number of the place you live in. On the contrary, for your business, you need to set a registered office address instead as well as a service address.
CHOOSE THE DIRECTOR(S) AND THE SECRETARY
You need to have a director if you’re a private limited company or two directors and a secretary if you are a public limited company. These people start, run and manage the business according to law. Secretaries, on the other hand, do the organizational work and paperwork.
CHOOSE THE SHAREHOLDERS
Your company needs to have shareholders to function properly. You can be your own shareholder with 100% of the company if it’s a small one. However, there’s not a limited number of people who can have shares in your company. It’s up to you. After you’ve chosen them, you need to submit their personal info as well as the number and the value of their shares.
REGISTER
According to DNS Associates, this step might be overwhelming for many people, and this is the moment where you can seek help from a renowned agency. They will help you submit your registration, and submit all the other documents such as the Memorandum of Association and Articles of Association – the documents in which you agree on who runs your business, as well as Form 10 and Form 12. To make sure you won’t make a mistake, the best option is to consult professionals and get to the next step.
Congratulations! You’re now one step closer to your business goals. Don’t forget to keep accurate records of the company. Good luck!
