What are the advantages of setting up a limited company for your business?
You might have been running a business as a sole trader, and now you realize that your business is growing, and you want to know a way to set up a company that can give you more security while running your business.
So let me show the advantages of setting up a limited company.
- You can start a limited company quickly.
- The company has a separate identity so the companies can have their contract with their company and not with the individuals.
- Your assets will not be at risk for the debts of your business.
- Many large companies will not deal with sole traders, so setting up a company gives you credibility, the suppliers and the customers will have confidence.
- There could be tax benefits when the shareholders receive the salary and dividends.
When you plan to set up a company, first, you must consider what you need to set up a company.
- A sole trader might find it difficult to raise additional capital, whereas a company can raise money by issuing new shares at any time.
Select a name
Selecting a name that suits your business is essential because the name represents your company. For example, if you want to set up a company to travel, the people who search for a travel company should be able to find your company from the name of the company.
Address for registration
Many people use their residential address for this purpose, or even you can use a third-party address.
Company director
You must have at least one director for the company and having a secretary is optional. You must give all the personal details of the directors when registering your company to the company’s house. Ensure that every director must register to pay their tax.
Company shares
You must be careful in deciding the share structure because all the shareholders in the company will get the shares of the profit.
Company bank account
It is essential to have a separate bank account for the company to use for all your transactions when it comes under the company’s name.
Documents
The constitution and rules of limited companies put in two documents called a memorandum of association and an article of association. These set out the types of shares that the company is entitled to issues and the rules governing the voting of shareholders and the relationship with the company.
The purest form of shares is ordinary shares issued to the shareholders when they made the total price of the claims. These shareholders have the right to receive the profit percentage, called the dividends.
The directors agree to the dividend payments at the annual general meeting; each shareholder will receive an amount according to the number of shares each person holds in the company. Then register your company with the company’s house to get the certificate and the company number.
If anyone wants to set up a limited company, it is crucial to learn how to set it up before starting it.
Loan capital
A limited company can borrow the money from a bank and issue a certificate. That means this loan carries a set interest to pay back at the end of the period.
Sole trader accounts
After completing the financial statement, the tax calculation on the net profit.
The limited company accounts.
When they produce the financial statements, take out the corporation tax from the net profit and the balance set for dividend payments. Once you have done the accounts, you must file the accounts with the companies’ house and pay your tax; besides, you must file the charges with the corporation tax; if not, you will get the penalties.