Planning a New Business

Over 500,000 new companies were formed in the UK in the last one year -- a growth of 8.5% compared to the same period in the last decade. The substantial rise can be traced to the ease with which today's company formations take place. The whole process of registering a new corporation can be completed online in a few hours -- a far cry from the days of navigating paperwork at the Companies House for weeks.


Perhaps you're already in business as a sole proprietor or partner in a small venture... What's so special about a limited company that you'd be interested? company formation is a process where a business like yours is registered at Companies House, becoming a distinct legal entity as a result. There are several good reasons why you'll want to consider this route:

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- Limited liability: The main reason businesses incorporate is to limit the liability of their owners (known as shareholders for incorporated entities). Because the company assumes its own identity, shareholders are shielded from the debts and liabilities it incurs in operation. Creditors cannot go after their (the shareholders') assets to recover what they're owed -- although there are a few exceptions outlined in the Companies Act.


- Capacity to sue: Or should we say, an enhanced position to seek legal redress. While you can also sue other parties as a sole proprietor or partner, incorporating puts you in a much better position. Your business' affairs are separate from yours, and that shields you from "blowback" should the proceedings fail to go in your favour. Likewise, you're allowed to minimize your personal involvement in cases where other parties sue your business.


- Establishing credibility: Incorporating your business makes you a more credible entity in the public's eyes. Limited companies are thought to have a permanence that's often lacking in sole proprietorships and partnerships, in addition to being more committed to responsible management. Incorporation also protects the company's name from being used by other businesses; this is very important in upholding public image.


- Tax benefits: These are yet another huge incentive to incorporate. As a limited company, your profits will be taxed at a flat rate of 19 percent (the current UK Corporation Tax Rate). You therefore incur a lower tax bill than you would've as an unincorporated venture -- sole traders and partnerships pay income tax. Companies also enjoy more leeway when it comes to deductible expenses and reliefs. Not to forget that shareholders can reduce how much they pay in National Insurance Contributions by drawing more income from dividends. This means you can shield the lion's share of your own earnings from the taxman by incorporating your business.


- Fundraising options: Corporations are allowed to raise capital by issuing new shares; either to new investors or existing shareholders. Unregistered businesses don't have this option. Whilst it's possible for such an entity to sell a stake in exchange for capital, investors often take the lack of a formal management structure as a red flag. As do banks and other sources of funding; accessing business loans is easier when you're a limited liability company.


- Succession: The life of a limited liability company is not dependent upon its founding owner(s). Once again, this is afforded by the fact that it's a separate entity with a defined structure; operations can continue long after the original owner leaves. Forming a company will thus create the possibility of selling your business in future if you wish to do so.


Get in touch with a company formation agent today for a simple smooth incorporation process