Forming a business can prove a profitable and beneficial way to operate within the UK. It is possible to remain a freelancer, if you work alone, but there are distinct advantages to setting up a limited company; benefits that you won’t necessarily enjoy by continuing as a sole trader or freelancer. However, simply deciding to set up a business is not enough as you will need to decide what type of business is best for you, your customers, and your shareholders. This is where it can prove especially beneficial to gain professional help on how to register a company.
The biggest difference between sole trading and establishing a limited company is the existence of shareholders. The business becomes a separate legal entity to those that are involved in the business and it should have a number of shareholders to help ensure the proper running of the business.
The company can be limited in a number of ways, however. Those that are limited by shares can use individuals or companies as shareholders. The shareholder may agree to pay more than the nominal value of the shares and, assuming the company enjoys success, they can still expect to make a profit. If the company succeeds then shareholders will profit but they stand to lose their money if the company fails.
A public limited company has many more requirements and the company must meet considerably more obligations than with a private company. This is because shares may be offered to the public and the regulations are there to ensure that shareholders are protected against potential wrongdoing. Shareholders are only liable for the nominal value of their shares, or the amount that they actually paid for the shares.
Not for profit organisations, such as charities and clubs, often consider a limited company by guarantee as their best option. No shares are issued and no profits are shared out. If the organisation should fail then the initial guarantee comes into force. The guarantee means that members must guarantee to contribute to the assets of the company if it is wound up which means that there is some liability, but it is a fixed amount of liability.