Business

4 Reasons Why You Should Make Your Business Limited

4 Reasons Why You Should Make Your Business Limited

If you’ve just started a business, you may not have thought about what type of company structure it should have. After all, it’s still in its early days, and it will take some time for it to grow into something that you need to structure in a specific way. However, the business world is full of surprises, and there may come a time when your business needs to take on a new form to continue growing as planned. Many different company structures are available to companies when they first begin operating. Each one has its pros and cons. Still, if you’re reading this article, then chances are you need to consider whether the business could benefit from being limited rather than an unlimited liability company. So with that in mind, let’s explore four reasons why you should make your business ltd rather than an unlimited liability company.

What is a Limited Company?

A limited company is an incorporated business that separates its owners’ assets from the company’s liabilities; this means that if the company gets sued, the owners won’t be liable for that debt. The name comes from the fact that the company has limited liability. The business will usually be formed as a limited company when a group of people invests in the business, and each takes a stake in the company in return for the money they put in. Having people invest in your company is a common way to fund a start-up with a few people involved in the business, but it also makes sense to continue with this as the company grows. When forming a limited company, you have to make an annual filing with the government.  This should include the names of the owners and directors of the company, the registered office address, and the company’s name. The owners of a limited company are called shareholders.

Limited Liability Protection

There’s no doubt that a limited company comes with a certain level of protection for its owners. It’s a way to limit their liability for their company’s debts. Now, you may think that this means that the owners of a limited company won’t ever have to do anything. But, unfortunately, that’s not quite the case. When a company owes money, the debt collectors will come after the company. They want the money that the company owes to be paid off. But, if there are no assets or money to use to pay off the debt, then there’s nothing that they can do. So, while a limited company gives its owners a certain level of protection, it also means that they have a responsibility to pay off the company’s debt.  However, if the business has enough assets and money, this extra protection for the owners is extremely valuable.

It’s Easy To Set Up

The good news about setting up your business as a limited company is that it’s not a complicated process. In most countries, all you have to do is file articles of incorporation with your local government and pay a small fee. Once you do that, you’ll be issued a business identifier such as a company name or a registered office address. The only real downside is that it might take a few weeks to get your business up and running, as you’ll have to file your articles of incorporation and wait for approval before you can continue setting up your company. Company formation is also made easier by organizations whose purpose is to aid you with making your business limited.

Tax Breaks

One of the key advantages of making your business limited is how it helps keep business costs lower; since your company is limited, tax rates will be lower.  When you start a business, you’ll be taxed on its profit. The amount of tax you pay will depend on your company type. If your company is a limited company, you’ll have to pay two main types of tax – Corporation Tax and Capital Gains Tax. And the good news is that the tax rates for these two taxes are lower than the tax rates for an unlimited company.

Company Continuity

As a business grows, it’s common to take on new employees. It may even take on new investors along the way. In some cases, this could mean that a few people own the majority of the company, and they’re the ones that make all of the critical decisions. This is where a limited company could help. If you decide to make your business a limited company, you’ll have to issue shares to everyone that owns a stake in the company. This means that everyone who owns shares in the company will have a certain level of ownership. This could be useful if you ever wanted to make a decision in the company that a couple of people owning the majority of the shares would disagree on, thus causing the issue not to be resolved. In this situation, one of the rights of the shareholders is that they would have a say in the decision and could help decide which way the company should move.

About the author

Ariaa Reeds

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