what are the benefits of a ltd company?
December 242009
i have just entered into a partnership with my son, the business has been going for years but only last week we joined forces, would a limited company benifit us? also i have been told there is a monthly payment for a ltd company is this true?
A company is a separate entity – a legal person in its own right, quite separate from those who own it (the shareholders) and those who run it (the directors).
As a separate person, a company can itself:
own property
employ people
act as director or secretary of another company
enter into contracts
sue in the courts
be sued
A private company may be limited by shares or by guarantee (a commitment to contribute a given sum if the company is wound up).
The key point to recognise is that a company has limited liability for its shareholders and the effect of this is that the members will not be required to contribute more than they have actually paid or agreed to pay towards settling its debts . This amount is usually determined by the value of the shares held, e.g. If a company has issued 100 ordinary shares of £1 each and they are fully paid, the shareholders will NOT have to pay any more.
December 24th, 2009 at 8:41 am
A company is a separate entity – a legal person in its own right, quite separate from those who own it (the shareholders) and those who run it (the directors).
As a separate person, a company can itself:
own property
employ people
act as director or secretary of another company
enter into contracts
sue in the courts
be sued
A private company may be limited by shares or by guarantee (a commitment to contribute a given sum if the company is wound up).
The key point to recognise is that a company has limited liability for its shareholders and the effect of this is that the members will not be required to contribute more than they have actually paid or agreed to pay towards settling its debts . This amount is usually determined by the value of the shares held, e.g. If a company has issued 100 ordinary shares of £1 each and they are fully paid, the shareholders will NOT have to pay any more.
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December 24th, 2009 at 9:29 am
You could not usualy be sued for debts of the company. The tax benefits of each type depend upon profits etc..,
Monthly payment? I can’t think of a specific one applicable only to Corporate entities. Your Accountant may charge more, but if you are a smal business the difference should not be significant.
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December 24th, 2009 at 10:07 am
Hi no there are no payments to limited companies
The benefits are
Financial security for directors if you company was to go but the personal assets of the directors would not be effected
It is easier for a Ltd to get credit account as the credit history of the directors isnt checked.
Some companies will only deal with limited companies.
Liability insurance is cheaper for a Ltd company
Bad things
Limited companies attract more paper work
You are taxed on your profit at 19% but you can get round this by paying yourself higher wages.
Visit http://www.businesslink.gov.uk for a full list of pros and cons you could also form a LLP limited liability partenership which has similar benefits of a LTD
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December 24th, 2009 at 10:32 am
I have a Ltd company and the only real benefit that I am aware of is a tax saving. However, all the extra paperwork involved seems to have bumped up my accountants fee. If I was asked now whether I wanted to become Ltd I wouldnt bother. Just too much extra paperwork. I am not aware of a monthly payment.
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Been trading for 10 years, been limited for 5.
December 24th, 2009 at 10:48 am
yes the payment is true, but the benifits of a LTD company is that if either company when in to debt and the companys had to be liquidated you won’t lose out on so much.
Also as a trading company it will be easier to get credit with other companys if you don’t have all the cash to pay there and then.
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December 24th, 2009 at 11:12 am
Financially, there may be a better taxation position. I do not know of any monthly payment for a Ltd company.
There will be a public record held at companies house, which is now accessible on the internet. You will have accounts published there, and information on who owns the company.
If you currently do not have an accountant for your business, then you probably would find some of the expenses associated with this prohibitive. However, the taxation benefits may cancel this out if you reduce your salary and take the profits as dividends. (I believe £10,000 of profits are no longer tax free in a Ltd company)
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experience
December 24th, 2009 at 11:18 am
Just to review some of the previous points and add a bit:-
Limited liability I would agree is the obvious classic benefit of the private limited company. Note that this advantage is stripped away if the directors commit fraud or some other criminal offence and remember that it is the directors, not shareholders, who are responsible for the company’s debts. The tradeoffs for this limited liability are the disclosure requirements requiring an annual return and accounts to be files at Companies House each year, thus being available to all and sundry to look at, for a small fee.
A guarantee company is unsuitable for a commercial business and is designed primarily for charities and other non-profit organisations.
LLPs are popular for accountancy and law firms, also as investment vehicles, but have not taken off for general business as the average person does not understand them. The main problem is that they have no constitution (equivalent to a company’s articles) and require a complex partnership agreement to be drafted between the members.
The main tax advantage of a small company limited by shares is that the shareholders (often the same people as the directors) can pay themselves a dividend at a lower tax rate than the income tax they will be paying on their salaries as directors. However, the amount paid as dividend and the amount paid as salary needs to be looked at carefully to avoid problems with the Inland Revenue (now HMRC).
Corporation tax will also need to be paid at the appropriate rate (there are several rates, depending on the size of the business). The basic rate of CT was abolished for the first £10,000 of profit some time ago but has now been re-instated making the advantages of incorporation much less clear cut.
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