Just to define, a limited company is a type of a company which allows an entrepreneur to keep their assets and finances separate from the business itself. Those persons who have invested in the business, or commonly known as shareholders are only responsible for any company debts only up to the amount that they invested. This is a good investment for people who do not want to risk their wealth. We presented five advantages of having a limited liability for you to understand the positive effects of having this kind of company.
1. Being a limited liability.
Being a limited liability is already an advantage because as mentioned earlier, the shareholders are the ones liable for any debt the company accrues according to the amount of their investment, nothing more and nothing less. With this, it can provide a comfortable feeling of security for investors in the company. Investors who prefer to invest in low-risk investments would tend to look for this kind of company because they can assure themselves they will not lose that much money.
2. Separate entity.
A limited liability is deemed to be a separate legal entity from its owners due to its nature. It will also exist beyond the life of its members. Even if the members retire or die, the company will continue to operate, which is a good thing. This ensures security for employees and other members as well because their job does not rely on higher positions.
3. Taxation and tax advantages.
These companies are taxed only on their profits and are not subject to the higher tax rates placed on sole traders or partnerships. If you are forming and running a limited company, you are recommended to pay yourself at minimum wage levels. This will allow you to take advantage of the tax exemptions because you will most likely to be exempted.
4. Company name.
By creating a limited company, it has to be registered to a certain company name. This will help identify the business in the marketplace, separating it from other companies as well. Registering your company name is free, just make sure your chosen business name is available. This company name is protected from the registration date, however, it is still not legally required to begin trading on that date. In general, this process of registration can be a good way to secure a name for future use.
5. Employee shareholders.
There are instances where employees can purchase shares and become shareholders of the company. This is considered an advantage because it rewards the employees of their hard work, giving extra motivation and determination to complete the job. They can also be an asset to the company because employees have an idea on how it works, they can suggest strategies that can help the company.
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