Manypeople dream of being the owner of their own limited company, but what doesthat entail? In this article we will provide you with a general overview of limitedcompanies.
Let’s start by definingwhat exactly a limited company is. A limited company is a private company in which the owner or ownersare responsible by law for the company’s debts to the extent of the amount ofcapital they invested in the company.Limitedcompanies are owned by an individual, people and/or other companies. Theindividuals who own a limited company based on shares are referred to asshareholders.
This is because the shareholders own a percentage of the company.The individual or individuals who own a limited company based on guarantee arecalled ‘guarantors’ as they give a portion of money to the company.How many persons can have ownership?Alimited company can range from having one owner to multiple owners. There is noset number. This, therefore, means that the company can be owned by one personor it can be collectively owned by many persons or cooperate bodies.
Get it?! The owner’s sole responsibilityTheowner or owners’ responsibility in a limited company is to make top-of-the-linedecisions such as appointing and removing a director, assigning roles todirectors, making adjustments to the article of association and altering thecompany’s share and capital. The owner may also be responsible for registering the limited company. Are the directors of limitedcompanies the owners?Avery common misunderstanding associated with limited companies is that thedirector is the owner, but that is not the case or rather should not be thecase. The director is responsible for the effective running of the company. Hisor her primary roles entails the following:§ Assist the company to soarto higher heights with his or her skills§ Makes decisions for thecompany while using independent judgment§ Manage the company onbehalf of the subscribers or shareholders§ Exercise and demonstratediligence, care and skillsIn a nutshell, directors areresponsible for the daily decision making in a limited company. So, then, ifthe director is not or should not be the owner then who is? Hmmm.You’veguessed it! The shareholder or shareholders are the owners of limitedcompanies. What are the financial liabilities ofthe owners of a limited company?Theowner’s responsibility is to make sure that the piggy bank never runs dry.
Inother words, they make sure that money is contributed to the business up totheir liability limits. The liability of shareholders is restricted to thenominal value of the shares that they purchased; which is normally £1 per share.The guarantor’s liability is always limited to their financial guarantees. Theguarantors or shareholders are required to contribute an agreed sum of moneyupon joining the limited company or whenever the company requests money to paythe bills.Now that wehave discussed in detail what a limited company is, let us zoom in on some ofthe benefits of having such a company.
Taxation: One of the main benefits of alimited company is the fact that you are likely to pay lesser taxes as opposedto a sole trader company.Protection: You are given addedprotection if and when things go wrong. You are therefore given the reassuranceof limited liability.Professional Image: Having a limited companyfor some business can add value to your company’s professional image.
Let’s saya big company wants to make a huge financial deal with you, they may be moreassured and feel safer to do business with a limited company than a sole tradercompany.There you have it! Are you ready tostart your business? Are you still unsure as to whether you should start a soletrader or a limited company? I bet you have gotten your answers.