Why go for limited company formation rather than sole trader or partnership company formation?

The key benefits of limited company formation are to the people who are in charge of the company activities. If something were to go wrong these people are not held liable. However, if it is a case of fraud, whereby the company decides to do business outside the scope of registered business or any business transaction which is considered illegal by the law, the directors and shareholders of the company will be held personally liable through court order.

If the directors were to be sacked, pass away, resign or retire for any reason, the company will still continue to exist and allowed to do business. On the other hand if anything goes wrong in a sole trader or partnership type company, all parties involved in the company will be held personally liable without exemption.

Another major benefit is their accessibility to acquire government projects through tenders, as most government projects and even some large scale project are only opened to limited companies for tender as they are seeking financial stability and credibility. In addition, limited company has higher marketing company profile to make it easier to sell the company in the future.

As limited company It will be easier to involve potential investors to help raise capital funding for the company by issuing shares or selling shares to them rather than coming up with a complicated partnership agreement. This is so, because you have more credibility and transparency towards the investors, supplier and customer. Concomitantly, there is also the increase willingness of large organizations to deal with limited companies as oppose to the rest.

Moreover, there is clear hierarchy and legal documentation governing company formation that clearly states to decide who will have the authority in managing the company. Thus, helps to minimize conflicts or disputes within the company. Any major dispute or issues are handled appropriately and professionally through the right channel, AGM (Annual General Meeting). While any disputes within the sole trader or partnership business were to happen, there are no proper channels to resolve disputes. This may end up ugly for the parties involved as emotions are allowed to fly uncontrollably.

Limited company has flexibility of managing income to minimize tax. There may also take advantage of tax incentive depending on their industry. You have the opportunity to safeguard yourself when dealing with large inventory purchases or trade. You should note that after the completion of any limited company formation, there is no time frame requirement for the company as to when to commence business or trade. Concurrently, this allows you to secure your company business name for your future business endeavors.

During limited company formation, there will be legal documents (e.g. MA(Memorandum of Association) and AA(Articles of Association)) you are required to fill and provide information such as company name, business nature, location of operation, director’s authority, and shareholder rights. There is more paperwork and cost in a limited company formation but the advantages of running a business is worth the time and money.

After completing the limited company formation, the company will be subjected to companies act and business laws and practices which will be governed by governmental body, Company House and in some places also known as Registrar of Companies (e.g. Scotland). The binding business laws, practices and companies acts towards the limited company will respectively following the country that the company is registered.

Do not miss out on extra information and head out to Limited Company Formation.

Article Source: http://EzineArticles.com/?expert=James_Marny

The latest statistics published by Companies House states that 30,324 companies were incorporated in England and Wales and 1,767 companies were registered in Scotland in February 2010. A large number of these businesses were registered as limited companies. The primary reason for the popularity of limited company formation is that the business as seen an entity independent of the personal assets of the shareholders and owner(s). A company can be registered as limited by either shares or guarantee.

Limited Company Formation: Types

There are three basic types of limited companies:

Private company, limited by shares: This type of company entails limited liability for the shareholders and owners.
Private company, limited by guarantee: This type of company is guaranteed by its members, rather than through share capital.
Public limited company: This type of company requires that the amount to be paid on shares be borne by the shareholders.

Limited Company Formation: The Process
Registering a limited company is fairly easy and entails the following steps:

The first thing you need to do is to choose a name for the company, which is distinct from those that already exist. Ensure that you check for the availability of your preferred name.
Next, you need to complete Forms 10 and 12. You can download these forms from the Companies House website or obtain paper copies by visiting the physical office of the organization. Electronic registration does not require the filling of Form 10.
These forms have to be signed by the directors and secretary of the company.
You will need to submit the Memorandum of Association, after having carefully filled it. This is a very crucial document and includes the company’s name, type of business, undertakings and location.
The Articles of Association has to be signed by all partners and subscribers. This document includes information on the power of directors, the rights of shareholders, and regulations and operations of business affairs.
These documents have to be submitted at the state limited liability company office.
You can post the documents, along with the forms. Ensure that you also enclose a cheque for £20.

You will also need to mention the number of shares to be held by each subscriber in the case of private limited company formation. The signature of each subscriber has to be included along with their allocated shares and this needs to be witnessed by a third party.

All these formalities can be completed without any hassled by enlisting the services of an experienced company registration agent like A1 Companies Services Limited. With 25 years of experience in the field, a1companies.com the expertise as well as well as the experience to offer the best company formation solutions.

If you want great tips on UK limited company formation, as well as tips on how to grow it successfully, you may visit http://www.A1companies.com.

Article Source: http://EzineArticles.com/?expert=Charles_M_Roberts

Following the introduction of the IR35 legislation, there are now only three real options open to contractors, so let’s have a look at each option in more detail.

The options available to contractors are as follows:

Option 1 – Umbrella Company (Payroll service)
An umbrella company is essentially an invoicing vehicle for contractors who want to avoid the administration duties normally associated with contracting, namely issuing invoices, chasing payments from clients / agencies, calculating tax and national insurance (NI) contributions and making payments to their bank account. It’s worth noting that because you are employed by the umbrella company, IR35 legislation does not apply.

Contractors who work through an umbrella service will submit timesheets and expenses (normally online) and then leave the rest up to the umbrella company. They will generate and send an invoice to the agency or client, chase payment when it’s due and then upon receipt of payment will calculate your tax and N.I and transfer your net pay direct to your bank account.

Umbrella Company Providers
Naturally, there is a fee for providing an umbrella service which can vary hugely between different companies.

For new contractors the umbrella company is often an appealing option, as it provides an easy and cheap way to decide if contracting is for you.

Many contractors, especially those who are contracting long term or want the best possible return normally decide to start their own limited company, which we will move onto now.

Option 2 – Limited Company (or Personal Service Company)
The vast majority of contractors work through their own limited company, as this is the most tax efficient method, enabling them to keep more of their income. However, these tax advantages are wholly dependent on whether they fall inside or outside IR35 “rules”.

Contractors who fall outside the IR35 rules will often be better off operating through a limited company, whereas those inside IR35 will often be better with an Umbrella company.

By setting up a limited company you have complete control of the running of your company and its bank account. Provided your contract falls outside IR35 (i.e. you’re not deemed to be an employee of the client using a limited company as a disguise) you may draw dividends from the company that are not subject to National Insurance (NI) contributions.

Many contractors decide against starting a limited company because of the day to day administration and the legal requirements all limited companies have to comply with. Whilst many accountancy practices offer services to remove many of these headaches (i.e. VAT returns, monthly payroll, annual company accounts, company formation and corporation tax returns), until now a truly comprehensive accountancy package has not existed.

Option 3 – PAYE through an agency
The last and generally the least favourable option for contractors is the agency PAYE route. In short, you are employed by the agency so you pay full tax and national insurance contributions and you are either tied to working through that agency indefinitely or having to resign and join a new payroll scheme each time you change agency.

Freestyle Accounting are a firm of specialist Contractor Accountants, offering a complete limited company contractor accountancy service. Find out how we take away the administration burden and hassle of running your own limited company as a contractor.

Article Source: http://EzineArticles.com/?expert=Peter_Tyler

If you’ve been self-employed for a while, you may wonder what the next step on the path to becoming the next Coca Cola or Nike is. Although that stage is a long way off (and will remain so for most businesses), the next step to becoming a respectable household name is to form a limited company. Over the course of this article I will explore how to go about becoming a limited company and the benefits of doing so…

The Benefits of a Limited Company?

Of course, the formation of a limited company sounds a fantastic idea – it’s a benchmark for how far your business has come and lends an air of legitimacy and respectability to all your future dealings. But behind these superficial reasons, there are also some obvious benefits to registering your business:

- The main advantage of the formation of a limited company is the limited liability status you are granted. This means that if the company goes into receivership the shareholders and officers’ own assets are not at risk (provided you have always operated within the law!)

- Sole Traders and Partnerships pay tax on the first penny of profit they make. If you’re a limited company, the first £10,000 of your profits is free from the taxman’s grasp.

- Profits of the company can be paid as dividends to the shareholders. Currently national insurance is not applicable to dividend payments, reducing your taxes further…

- As suggested above, your customers and suppliers are likely to have more confidence in a limited company ahead of a non-limited business. You may find that more people are happy to deal with you, making it easier for your business to continue its growth.

- No two limited companies are allowed the same name, so registering is a good way of protecting your brand.

- There is no obligation for a limited company to begin trading immediately, so forming one is considered a lot cost and simple way to protect a business name. This doesn’t in itself give the right to use the name, but it’s a good for companies who anticipate future developments well in advance.

How’s it done?

So now that you know the benefits that a limited company is allowed, how exactly do you go about become one?

While there are a lot of websites offering to help with the process, the cheapest and most straightforward way to form a limited company is to deal with Companies House directly. For this, you will need:

- A memorandum of association. This outlines the company name, its registered offices and what it does.

- Articles of association. These establish the rules for carrying out the company’s internal affairs.

On top of this, you will then need to fill out Form 10 (which provides details of directors, the secretary and the registered offices) and Form 12 (a statutory declaration of compliance with all legal requirements surrounding the limited company’s incorporation.)

Companies Houses charges a standard fee of £20 to form a limited company, but also offers a premium service that offers same day incorporation for £80, which should be considered if the funds are available and time is a factor.

If all this sounds a bit of a hassle (and it really can be – mistakes are very easy to make in the process), there are simpler routes if you’re willing to pay a premium. You can consult a lawyer or a business agreements specialist to ensure that the process is not delayed any more than necessary, although this will cost you. Alternatively, one of the quickest is to buy an “off the shelf” company from a company formation agent. This is one of the quickest routes, but expect to pay well over £100 for the privilege – although of course you can shop around. An off-the-shelf business will already have a registered company name, but you can change this easily to the business name of your choice.

And that’s the process of formation for limited companies. There are reasons to stay self employed, but from a tax perspective the positives outweigh the negatives!

Iain Mackintosh is the managing director of Simply-Docs. The firm provides over 1100 business agreements covering all aspects of business from holiday entitlement to non-disclosure agreements. By providing these legal documents (with content provided by leading commercial lawyers, HR and health & safety consultants) at an affordable price, the company intends to help small businesses avoid costly breaches of regulation and legal action.

Article Source: http://EzineArticles.com/?expert=Iain_Mackintosh