There are many benefits of trading as a limited company. In most western countries it is possible to register a business so that it gains the status of a limited liability company and this must be seen in the context of the risks that all businesses face.
Financial risks might be the most obvious. The aim of any business is to make a profit but this is easier said that done. Considerable financial risks are always involved as money must be invested and risked before profits can be made. Both the owners and the business itself will benefit by being fenced off from each other.
The legal risks that are faced by the average business far exceed personal risks face by any individual. A business has liabilities in respect of staff who may be injured or become disaffected. Regulatory bodies such as competition tribunals or health and safety regulators may also cause many difficulties and possible legal action.
People who work for a firm also face risks in the course of their own lives.For example, a key employee may be struck down by illness or accident and this could impinge of the business if the two are indissolubly linked. So in the case of this particular risk it is again better that owners and their firms are protected from each other.
The main benefit of registering a business is that it limits the owners' responsibility for debts that the business may incur. So, for example, if the business becomes bankrupt debtors may not legally sell the owner's house and personal assets in order to pay creditors, leaving him destitute. This is also an advantage to a business which has its own identity.
Because it is a separate legal entity it enjoys a certain status. This might make it seem reliable and trustworthy when it comes to dealing with other companies and with the public. It could also put the company in line for tax breaks, depending on the country or state in which it is located.
The limited liability company will have an identity of its own, and it's name will be protected by law. No other business may appropriate the name. Should the person who started it up wish to sell some or all of his shares and move on, the benefits of trading as a limited liability company will become even more apparent. The company will continue to exist and carry on trading as it has done in the past.
Financial risks might be the most obvious. The aim of any business is to make a profit but this is easier said that done. Considerable financial risks are always involved as money must be invested and risked before profits can be made. Both the owners and the business itself will benefit by being fenced off from each other.
The legal risks that are faced by the average business far exceed personal risks face by any individual. A business has liabilities in respect of staff who may be injured or become disaffected. Regulatory bodies such as competition tribunals or health and safety regulators may also cause many difficulties and possible legal action.
People who work for a firm also face risks in the course of their own lives.For example, a key employee may be struck down by illness or accident and this could impinge of the business if the two are indissolubly linked. So in the case of this particular risk it is again better that owners and their firms are protected from each other.
The main benefit of registering a business is that it limits the owners' responsibility for debts that the business may incur. So, for example, if the business becomes bankrupt debtors may not legally sell the owner's house and personal assets in order to pay creditors, leaving him destitute. This is also an advantage to a business which has its own identity.
Because it is a separate legal entity it enjoys a certain status. This might make it seem reliable and trustworthy when it comes to dealing with other companies and with the public. It could also put the company in line for tax breaks, depending on the country or state in which it is located.
The limited liability company will have an identity of its own, and it's name will be protected by law. No other business may appropriate the name. Should the person who started it up wish to sell some or all of his shares and move on, the benefits of trading as a limited liability company will become even more apparent. The company will continue to exist and carry on trading as it has done in the past.
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Doing business as a limited company is only one of the ways company formation can occur. You can learn more by visiting Companies House company formation web pages soon.
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