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Discover The Benefits Of UK Company Incorporation

Sep 16, 2008
If you own your own business and are getting to a stage when people are showering you with all sorts of advice from company incorporation to limited liability and you stare blankly, then this article is for you. There are benefits of company incorporation however it is essential to understand what all the jargon means before committing to the change, although this article offers impartial information it is advised to seek further professional advice on the implications of company incorporation.

If we take the definition of a company to mean an association of people formed together for some common purpose then this can cover not only for-profit organisations but also charitable or club organisations. The motivation for company incorporation for any organisation lies in the status change of the company, as the company itself becomes an individual meaning that there is no personal liability for any director of the company.

This also means that the company can borrow money, buy property, sue and be sued and enter into contracts under the company name. So if you own a company which does not have incorporated or limited status then any contract you enter, you are personally liable for that contract. As opposed to signing on behalf of a company you are signing as an individual so can then be held liable for any deviation of that agreement.

Company incorporation means that the name of your company is protected as no two companies can trade under the same name. There is also a clause which means that the company can live on until it is struck off by Companies House, the company can change directors and be resold without changing the company status. A company's structure depends on what type of company incorporation the company undertakes.

There are three main types of company structure and they are public and private companies limited by shares, then companies with limited guarantee. The latter is generally used when dealing with a clubs, schools or societies as it is no longer legal to form company shares within a limited guarantee organisation, the members of the association agree the limited guarantee between them which should be a nominal fee of 1 to 10 GBP.

Public companies must have a minimum asset worth of 50,000GBP and anyone can buy shares in the company and the control of that company is split between the shareholders. The implications of this are that the fate of the company rests in a public consortium and control of a company can be lost, with companies being liquidated to unlock the profit in the assets.

Limited companies are still based on shares however they are not up for public sale and the initial investment in that company depicts the control of that company. If two directors invest 500GBP in the formation of a company then the control of this company is split equally between the two investors. Company incorporation is effective in limited companies as it allows private control of the company's decisions however only a minimal risk of liability is incurred.
About the Author
Dominic Donaldson is an expert on company incorporation and contributes to trade publications on the subject.
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