Skip to main content

Which Company Type Should You Choose?

Starting a business is a series of difficult decisions. And when it comes to which type of company we ought to choose, few of us are experts. However, the type of company you choose may shape your business for years to come, so it's best to be as informed as possible.
Different business types are appropriate for different types of businesses. So choose the type of company that is most appropriate for you.
Private Limited Company
One of the advantages of a private limited company for sole traders is the fact that it affords them limited liability. This means that if your business fails, your personal income, which is considered to be separate, is protected.
Credit: pixabay.com
Those who set up a limited company may also find themselves benefiting from a lower tax rate. Income tax in the UK is set to 40 percent for those earning £32,000 to £150,000. That means that if you're a sole trader and you earn £60,000, you'll pay a 40 percent tax on everything you earn above £32,000.
However, if you are a limited liability company, you'll pay the corporation tax rate of 20 percent on any income you earn. This is higher than the tax you'd pay on the personal allowance. It's the same as the basic rate of income tax. But it's much lower if your earnings are greater than £32,000. So if you expect that your company will earn more than, say, £40,000 a year, then it will be more tax efficient to trade as a limited liability company.
Limited liability companies also have benefits over and above that which you'd get as a sole trader. Not only are your assets not on the line if your business fails, you'll also appear more credible. People generally perceive limited companies in a better light than they do sole traders and partnerships. And if your company is limited, customers are more likely to trust you.
In a way, a limited company is rather like getting free marketing. You automatically build a degree of trust.
What's more, you can find company formation resources readily online. It's usually a simple process, involving a single transaction with the Formations Company. And it usually costs a little over £100 to set up, which isn't a great deal when you consider all of the benefits.
Limited Liability Partnership
Sometimes, however, you may opt to form a limited liability partnership. Partnerships tend to be quite a flexible, but you'll often have to work a little harder to build a good reputation. At the outset of the limited liability partnership, you'll have to draw up a contract between yourself and the other partners.
Because people in partnerships are often close friends or relatives they think that they don't have to draw up a contract. This is a bad idea. A contract is needed to clearly define each person's role. It also needs to function as a legal document so that disputes can be resolved. Too often partnerships break down because of disagreements or arguments between the initial partners.


Comments

  1. I read some wise quotes in Facebook that we should pick the right boss instead of company. It is so true for my case as that allowed me more side incomes.

    A contract is always a must whether a husband and wife business or not. Even marriages need to register and sign to prevent unforseen disputes like business.

    ReplyDelete
  2. I read some wise quotes in Facebook that we should pick the right boss instead of company. It is so true for my case as that allowed me more side incomes.

    A contract is always a must whether a husband and wife business or not. Even marriages need to register and sign to prevent unforseen disputes like business.

    ReplyDelete

Post a Comment

Thank you, readers!

Popular posts from this blog

My Failed Project In Baking Mini Egg Cakes

FAILED THIS TIME..... I don't know why, I follow exactly the ingredients and the method written in her website but it was not successful.  Something went wrong somewhere but I don't think I want to try it again.  This recipe is called Mini Egg Cake which is supposed to be soft, airy, light sponge cake but the way I made them, they turned out hard and crusty cake.   If I try again one day, I will half the portion... cos I like to eat these traditional egg cakes.... The Ingredients...  No point putting the recipe here since I failed..  LOL...  The portions of this recipe....  It looked very promising when I put them into the oven.... Even when they were in the baking process... they look good, aren't they? LOL...  I was so happy just by looking at the mini egg cakes in the tray....  And after they were let out... my heart sank....  The minute I took them out from the tray, I knew... Hard at the top...  Tak Jadi = Failed.... Now come to t

Mini Birthday Celebration At August Healing, Ipoh

GETTING HEALED AGAIN... this time four of us went to August Healing for other sweet and savoury delights.  This time when we went up to the little cafe, the tables were all occupied except for one.  Next time we must not go during lunch time.  Mistake....  Anyway, we managed to get a table near the window while waiting for another two of my friends to arrive.  First time visit for them and I hope they like the food there as much as I like them.  We ordered three different varieties to share as we had a heavy breakfast in the morning....  Which shall I choose? Berries bread pudding today....  Forgot what this is called....  Garlic honey scones...  Coffee for my friends.... As for me, I had Chamomile tea....  We ordered one croissant to share.... Smoked duck and omelette fillings... Full to the brim... RM15....  Quiche again.... different fillings this time... RM15 And a Happy Birthday piece of cheese cake... RM14.. Though just a few varieties, we were very full.... For dinner, I just ha

Home Cooked Dishes

NOT MUCH HAPPENING... and lazy too.... My neighbour gave me half pumpkin and I have been keeping it for a couple of days before I finally decide what to do with it.  I cook it into small chunks and sauteed it with minced meat, okra and basil leaves.  Yes, it would be great to put in some small cilipadi but unfortunately, I did not find any in my fridge.  Steamed a bowl of rice and that was meal for dinner.... One dish meal....  Pumpkin reminds me of sweet potatoes...sweet after cooking... Another dinner meal consist of Sambal Fish, black pepper met and a hard boiled egg  I only boiled the egg, the other two dishes were "sponsored" by my neighbour... LOL...