The keyword, when it comes to the benefits of trading as a limited company, is "liability". Said firm can be public or private, but its liability doesn't extend to beyond the assets of the firm in question. Another point in favor is the advantageous tax treatment such companies get, and the way that profits can be distributed.
These firms can be of more than one type, based on the country of registration. UK-based companies can be a Public Ltd. Co. Or private and limited by guarantee or shares. Some countries allow LLC registration, which are limited liability companies where the taxation usually depends on how many partners the firm has.
For a business that is currently under sole proprietorship, changing the structure to a Ltd. Co. Has many benefits. For starters, the most important advantage is that the proprietor's assets won't be at risk anymore. This is important if the business fails and ends up in receivership.
In can also offer the necessary protection in certain professions like medicine, where the practitioner is always in grave danger of being sued and losing everything. Apart from protecting assets, there are also the tax advantages. Many countries provide an initial tax-free earnings period while some won't tax the firm at all and only tax personal income obtained by partners from the firm.
It also fosters trust and confidence among suppliers and customers who would otherwise have no choice except to trust in the proprietor. As for the regulatory compliance and paperwork, it's not too big a change from the kind of filings required of a self-employed person. It is a whole lot less bothersome than incorporated firms.
Bottomline here is that people starting out in business would do well to carefully consider the benefits of trading as a limited company. It safeguards personal assets, boosts the firm's reputation and has many tax and profit distribution advantages. To top that off, the paperwork isn't half bad.
These firms can be of more than one type, based on the country of registration. UK-based companies can be a Public Ltd. Co. Or private and limited by guarantee or shares. Some countries allow LLC registration, which are limited liability companies where the taxation usually depends on how many partners the firm has.
For a business that is currently under sole proprietorship, changing the structure to a Ltd. Co. Has many benefits. For starters, the most important advantage is that the proprietor's assets won't be at risk anymore. This is important if the business fails and ends up in receivership.
In can also offer the necessary protection in certain professions like medicine, where the practitioner is always in grave danger of being sued and losing everything. Apart from protecting assets, there are also the tax advantages. Many countries provide an initial tax-free earnings period while some won't tax the firm at all and only tax personal income obtained by partners from the firm.
It also fosters trust and confidence among suppliers and customers who would otherwise have no choice except to trust in the proprietor. As for the regulatory compliance and paperwork, it's not too big a change from the kind of filings required of a self-employed person. It is a whole lot less bothersome than incorporated firms.
Bottomline here is that people starting out in business would do well to carefully consider the benefits of trading as a limited company. It safeguards personal assets, boosts the firm's reputation and has many tax and profit distribution advantages. To top that off, the paperwork isn't half bad.
About the Author:
If you are preparing to begin the process of company formation, it helps to obtain authoritative advice to walk you through the complexities. Companies House helps you to check out the data available on existing businesses.
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