If you are debating whether to register a new business as a limited company, it’s important
to know the advantages and disadvantages of creating one. You also need to know how to
register as a limited company and the things you must take into account for your business.
Businesses tend to fall into one of the three areas: partnership, sole trader, or limited
company.
If you are interested in growing your business significantly, and protecting your personal assets from liabilities and employee staff, then a limited company will be the best option for you.
In this article, we will go through the important things to know about registering a limited
company and the route you should take.
The Advantages Of A Forming A Limited Company
Protection from financial liabilities – debts and liabilities are limited to the company. If the business was to go flat or fail completely, you are protected from facing personal bankruptcy (except in a few uncommon circumstances.) The company’s finances are completely separate from your personal finances. If the company fails, you will not be seen as responsible for the company’s debts.
Lower corporation tax – limited companies attract lower corporation tax. Sole traders, however, usually receive higher rates of income tax.
Hiring employees – a limited company will make it easier for you to hire lots of employees and you also have the option to pay salaries through the PAYE scheme (Pay as You Earn).
The business is its own legal entity – meaning that if you ever desire to sell the business, later on, it will be easier to sell or to sell people shares of the company, increasing capital.
The perception of the company – limited companies are usually viewed as being large and professional organisations. This will be especially important if your clients are either government organisations or other businesses.
The Difference Between A Private And Public Limited Company
It is worth noting that there are a few key differences between a private and public limited
company. Many of the differences relate to the fact that private limited companies are
usually less formal.
Share capital – a public limited company needs to have at least £50,000 of share capital, whereas private limited companies don’t have a minimum amount.
Private limited companies are able to have just one shareholder who might also be the director, and there is no maximum number of shareholders. Shares are not able to be traded publicly on the stock market though.
Accounts – public limited companies are required to file their accounts within six months of the accounting year, while for private limited companies it is nine months.
Important Tips For Registering A Limited Company
Deciding the name of the company – when choosing the name for your company, you must remember that you cannot use a name that is already in use by another company. Search any potential name ideas you have for the company into a search engine to discover if another registered company is already using that name. You could also get in touch with the Intellectual Property Office to check if a name is registered. A registered name cannot include misleading titles such as Chartered or include professional qualifications that you do not hold.
Ensure to follow the legal requirements in place – this is so crucial for pretty obvious reasons. There are a few requirements that limited companies must abide by such as filing annual returns, submitting accounts, and paying National Insurance contributions. Educate yourself on these legislations to ensure your limited company doesn’t face any trouble.
Choosing company officers – a limited company needs to have at least one company officer who is responsible for the business. Private limited companies must also have a company director, who will manage the company based on the law. Depending on the size of your company, you could also have company secretaries, though these only tend to exist in larger companies.
Decide how to register – a limited company can be registered in multiple different ways, and thankfully it is fairly straightforward. The two main ways are registering your company with Companies House yourself or using a company formation agent.
The required documents – you must have certain documents to be able to register your limited company. These will need to be submitted to Companies House before you are able to start trading.
Once the company is registered – congratulations! Once the company has been registered, you will be sent a certificate which confirms that the company exists and states the company number and date of establishment. Now you need to register your limited company with HMRC within three months of trading, or you could be at risk of a penalty.
Thank You So Much For Reading!
Thank you for reading this article and we hope you have found it useful. If you are at the
beginning of your journey with your limited company – we wish you the best of luck! Make
sure to check out our other articles to provide you with an increasingly business-savvy brain.