A limited company gives its owners, known as shareholders, some great protection. This is a major benefit compared to other types of businesses like sole traders or partnerships. Let’s break it down:
Limited Liability: This is the most important part. If you are a shareholder, your personal belongings are safe. If the company has money problems or gets sued, only the money you have put into the company is at risk. For example, if you invest $10,000 in shares, that’s the most you could lose, no matter how much the company owes.
Separate Legal Entity: A limited company is seen as its own separate “person” in the eyes of the law. This means it can own property, take on debts, and sign contracts all by itself, without mixing in the owners' personal finances. So, if the company gets sued, it’s the company that has to deal with it, not the individual shareholders.
Credibility: Running a limited company can make you look better to customers and suppliers. They may feel more secure working with a company where financial risks only affect the business and not personal assets.
Tax Efficiency: Limited companies often have different tax rules that can save money. The company can keep its profits to reinvest, which might lower the overall taxes compared to the income you would earn as a sole trader or partner.
In short, setting up as a limited company can be a smart choice. It helps protect your personal finances while you work on your business goals!
A limited company gives its owners, known as shareholders, some great protection. This is a major benefit compared to other types of businesses like sole traders or partnerships. Let’s break it down:
Limited Liability: This is the most important part. If you are a shareholder, your personal belongings are safe. If the company has money problems or gets sued, only the money you have put into the company is at risk. For example, if you invest $10,000 in shares, that’s the most you could lose, no matter how much the company owes.
Separate Legal Entity: A limited company is seen as its own separate “person” in the eyes of the law. This means it can own property, take on debts, and sign contracts all by itself, without mixing in the owners' personal finances. So, if the company gets sued, it’s the company that has to deal with it, not the individual shareholders.
Credibility: Running a limited company can make you look better to customers and suppliers. They may feel more secure working with a company where financial risks only affect the business and not personal assets.
Tax Efficiency: Limited companies often have different tax rules that can save money. The company can keep its profits to reinvest, which might lower the overall taxes compared to the income you would earn as a sole trader or partner.
In short, setting up as a limited company can be a smart choice. It helps protect your personal finances while you work on your business goals!