Why choose to set up a private limited company? There are many reasons why it is best not to set it up. This includes higher costs and more administration compared to that of a sole trader.
One of the main reasons why you should set up a private limited company involves personal financial capability. If you choose the sole trader route and your business does not succeed, you are personally liable for its debts. You can put yourself at a big risk if the debt is high enough and you cannot pay for it. Thus, it is better to set up a limited company as this protects the person who plans to set up a business.
Reasons to start a limited company
A limited company is a separate legal unit that is responsible for its own decisions. Private limited companies’ finances are separate from their respective owners. Private limited companies and public limited companies can have many shareholders. The difference is that shares cannot be put into the stock market in private limited companies.
The risk of loss in money is limited to the money invested by a director of a limited company. This implies that trading is done honestly and not with fraud. However, bank loans are held accountable to you if you provide personal guarantees for that limited company.
People who run private limited companies obtain more credibility to potential clients, investors, or partners.
Steps to set up a limited company
You register your limited company online at Companies House. You can also allow a solicitor, an accountant, or an agent to register for you by paying him a small fee. You just need to give some basic data and a few signatures in order to set up a limited company.
You can purchase ready-made limited company names. However, if you desire to start a brand new limited company, you must submit Companies House a memorandum of association, a complete IN01, and articles of association.
The nature of the business, the limited company’s name, and the registered office are the components of a memorandum of association. The director must affix his signature in the memorandum of association in front of a witness. A registered office is the official address of the limited company. This is where letters and reminders, notices will be sent to by the Companies House. The rules and guidelines in running and regulating the company are the parts of the articles of association.
The responsibilities of company directors
There must at least be one appointed director in private limited companies. He can also be a shareholder of the company. A person is disqualified from occupying this position if he is an undischarged bankrupt, or is younger than 16-years of age.
Directors of private limited companies notify Companies House of the company’s changes in its structure and management.
Company directors must pay income tax and Class 1 National Insurance contributions since they are employees of the company.
You can contact our firm if you want to set up a limited company.