Forming a company
If you run a business as a partnership or sole trader, you may have considered converting to a limited liability company. This month I’ll look at how setting up a limited company could help you and some other considerations of doing so.
How does it work?
If you are a sole trader, then you have personal legal responsibility for the business and its debts fall to you and you alone. A company on the other hand is a separate legal entity, so it can enter into contracts in its own right. A typical company will have one or more directors who work for the business and make decisions on the company’s behalf. Directors can be paid a salary. A company will also have one or more shareholders who own the business and can receive dividends (distributions of the company’s profits). Directors can also be shareholders.
- Under ‘Limited liability’ your personal assets, such as your house and car, are protected if the company goes bust
- Potential for significant tax & National Insurance savings
- Working as a company rather than an individual can often create a more professional perception of a business
- It is usually easier to get outside investment if required
- More administration is involved with submitting accounts and annual returns to Companies House
- Some information about the company is held on public record so can be viewed by anyone
A company can be formed online in less than a day. It is always recommended to take advice before doing so to ensure it is set up in a way that suits the needs of the business and its owners.
If you would like a free consultation to help you decide whether a company would be useful for your business, please get in touch.