Why Form a Company

A UK limited company is widely recognised as one of the most cost effective and easily managed corporate entities with which to establish a new business.

The principle benefit of trading through a limited company is the limited liability status which protects the personal assets of the company’s officers and members. Unlike non limited businesses, as long as the company is operated legally, directors and shareholders' personal assets are not at risk in the event of the company winding up. As the company is seen as a separate legal entity, creditors are paid from the company’s assets not the directors' personal assets.

Limited status can provide a certain level of confidence in the business both from suppliers and customers. It can be easily confirmed as a legally constituted concern and carries worldwide recognition as being a corporate body capable of conducting business on any continent whilst being established in a country with a stable and secure economy.

The company as a separate legal entity can continue to trade despite changing directors and shareholders. The company only ceases to trade when it is wound up and not when any individual leaves the company.

There can be taxation benefits to trading through a limited company. Current corporation tax levels mean that very little or no tax has to paid on retained profits and it is also possible to combine withdrawals through salary, dividends and benefits in kind in a more tax efficient manner than through non registered companies. Pension contributions for directors also qualify for tax relief and changes in legislation over the last few years have meant lower costs associated with the administration of limited companies.

Registering a limited company is a cost effective method of protecting a company name. There is no obligation for a limited company to commence trading within any set period after incorporation and names can be registered in anticipation of future development. No two limited companies can have exactly the same name and it is possible to raise an objection against any company attempting to register a name that is too similar to your own company name.