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Whitehill Business Services Ltd >> news >> latest news >> Why the right business structure is important

Why the right business structure is important

Posted by admin on December 10, 2015

Why the right business structure is important

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Starting your own small business is very chancy, because it could go either ways. However, when starting a business people worry about logos, premises and things like this, choosing the business structure is essential, and not enough people are apprehensive about this.

In the past business’ haven’t worried about business structure, and it went either of two ways, success or failure. However, it is said that with a business structure the success rate is high.

Give it an identity and limit your liability

A limited company has its own legal identity. This means that third parties contract with the business and not the individual directors. This allows change to happen over time. Directors and shareholders can change. Which is positive.

A benefit to incorporation is the shareholders of the company will have a limited or capped liability for the debts of the business.

Give your company something to shout about

Private limited company is trustworthy. The status shows that they have responsible management which is solid. This gives suppliers and customer’s confidence to use it, which gives your company more money.

Larger businesses will not deal with an entity that’s not a limited company. Incorporating a business can open business opportunities that wouldn’t be available otherwise.

Another big thing to consider is to choose a unique name, this is important for your company so that your business stands out.

Once you register with Companies house this means that the company name is protected and no other company can use the same name or a similar name.

Reap the tax benefits

The hassle of starting a limited business can pay off long term. Sole traders and partners in a partnership pay income tax while companies pay corporation tax and rates are lower than income tax rates.

Companies can also pay extra money to its shareholders on top of employee salaries. A shareholder director will often choose to receive the most tax efficient mix or salary and extras.

Most companies will have a general set of rules around allowable expenses. There’s a variety of allowances and tax deductible costs that can be offset against a company’s profits.

Another tax benefit to consider is the pension possibilities of incorporation, the company can make pension contributions, rather than an employee’s director funding pensions out of taxed income.

A company will often be able to make a higher tax relievable pension contribution than an individual and contributions will usually be a tax deductible expense for the company.

There’s is no National insurance contributions for an employer or employee on pension contributions and contributions are generally not taxable for the employee.

Get extra cash if you need it

New shares can be offered to existing shareholders or new investors, however only public limited companies can offer shares to the public.

Also if the company is going to borrow money from a bank it may be possible to secure the loan without need for the directors to give a personal guarantee.

Starting and stopping

To have a business open you do not need any trade to exist, meaning that you do not need any accounting transactions during its financial year. So if you have an idea but would not like to start developing it, then this is a plus because you can use your idea to progress in the future when you are organized and set to begin.

The same as registering a business as a limited company can assist the possibility of selling it in the future. This can be difficult to achieve with other business structures.

Get Limited

This is very easy for your company and worth it. You can do it online, this may even take a few hours, when in the past you had to wait weeks for companies house to process the information. And another plus is the cost is an allowable expense against corporation tax