There are thousands and even millions of companies around the world, and each of these companies is doing business and is registered under different categories and forms. There are companies which are sole proprietorships, limited liability companies, and business partnerships. Each of these setups of companies has its own advantages and disadvantages.
The limited liability company is one of the setups of companies that are mostly used by businessmen who want to establish their own companies. Limited liability company means that it is a company that really enables a person to keep his/her finances and own assets separate and distinct from the business that that person has established. Likewise, this means that the shareholders or those people who have invested in this business have a limited responsibility to pay any company’s debt. Their obligations are only tantamount to the amount of investments that they have invested into the company.
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Advantages of Limited Liability Companies
There are basically two types of limited companies: the private limited companies and the public limited companies. The private limited companies are like the public companies; however, the private limited companies can be managed and run with only one member and this type of companies is not permitted to trade shares publicly in order to raise capital. Public limited companies, on the other hand, are specifically created for a particular purpose; yet, this type of companies is less common.
The creation of a limited company follows some basic steps and criteria. First among these criteria is the need for the creator of the company to register the company with the Companies House. The second requirement necessitates that the private limited company at least has one director, and the public limited company should have at least two directors. Next, there should be at least one shareholder for public limited companies. Moreover, there should be a set of articles of association or agreed rules on running the company. Lastly, there is a need for the company owners to set up and process their company’s tax.
The primary advantage of establishing a limited liability company lies on the financial security that is provided by this kind of setup. If you are an investor into this kind of limited company, you will feel secure that your personal assets would be free from confiscation in case the company is dissolved, especially, if the company still has standing debts after its dissolution. Likewise, as a limited company, the company is considered as a separate and different legal entity in relation to its owners.
Lastly, limited companies are taxed lower than the other setups of companies. The rate is usually around 21% for limited company, while those of the sole ownerships and partnerships are around 40%.