Establishing a limited company enables a company to take legal responsibility for all commercial actions, rather than its owners being personally accountable. It also gives the business a legal identity as well as the option to own assets.
A limited company is usually owned by a number of individuals known as shareholders who each own a portion or share of the business. Depending on the company’s profitability this can increase or decrease in value.
Between the shareholders they will have different roles and responsibilities within the company – this will depend on the initial agreements and the share they obtain, however they will all have a say in the running of the business.
Limited companies can be privately or publicly owned – to be publicly owned the company must be floated on the stock exchange, meaning anyone is able to buy shares within it.
Advantages of becoming a limited company
From being protected personally and having reassurance that the business name cannot be used by anyone else, to finding it easier to secure business finance, being a limited company brings many benefits.
A key advantage that encourages many sole traders to become limited companies is that they then pose a lower financial risk to individuals as the business helps mitigate the specific directors’ exposure Instead, splitting the risk amongst all the shareholders.
When registering as a limited company there are things to consider when setting up such as;
Register to pay corporation tax. This must be done within three months of establishing the business or fine may be incurred.
Sign the Articles of Association & Shareholder Agreement, to outline each director’s individual responsibilities.
Register the address of where the business will be based.
Furthermore, businesses should be mindful of external costs, such as accounts auditors or outside legal counsel, as these can quickly add up. A budget should be set aside every year for this to avoid unexpected costs.
A business bank account must also be opened when becoming a limited company, this is to ensure that personal and corporate finances are kept separate. Although selecting the most suitable bank account can be confusing, it is illegal for a limited company to not have a business bank account. To help identify the best business bank account, visit Businesscomparison.com today to compare the best.