The Advantages And Disadvantages of A Private Limited Company
Seek professional advice to make an informed decision ...
Posted by Roger Eddowes on 20/04/2023 @ 8:00AM
A private limited company is a popular choice for small to medium-sized businesses, as it offers various benefits such as limited liability protection, a separate legal identity, and tax advantages ...
When setting up a private limited company, always seek professional advice to make an informed decision!
However, it also has some drawbacks, including complexity in setup and management, limited control, and costly compliance requirements. So, what are the advantages and disadvantages of a private limited company?
Advantages of Private Limited Companies:
Limited Liability Protection: Shareholders' personal assets are protected in case of company insolvency
Separate Legal Entity: The company can enter into contracts, sue or be sued, and own property in its own name
Tax Benefits: Private limited companies may be eligible for a lower tax rate and various tax deductions and credits
Continuity of Existence: The company continues to exist even if one or more shareholders die, retire, or leave
Greater Credibility: Due to stringent legal and financial requirements, private limited companies are considered more credible and trustworthy
Disadvantages of Private Limited Companies:
More Complex Setup and Management: Setting up and managing a private limited company requires meeting various legal and regulatory requirements
Limited Control: Shareholders have limited control over the day-to-day management of the company, which can lead to conflicts and disagreements
Limited Flexibility: Private limited companies are subject to more restrictions and regulations, limiting their ability to adapt to changing market conditions or pursue new opportunities
Costly Compliance: Private limited companies must comply with various legal and regulatory requirements, which can be expensive and time-consuming
If you decide to establish a private limited company, follow the correct administrative steps including choosing a company name, appointing directors and shareholders, registering the company, drafting legal documents, issuing shares, registering for taxes, setting up company bank accounts, registering for other permits and licenses, and complying with ongoing regulatory requirements.
"And always seek professional advice and guidance throughout the entire process!"
In conclusion, before choosing a private limited company structure, carefully weigh the advantages and disadvantages and seek professional advice to make an informed decision. I recommend them in the majority of cases, but they have to be set up and run correctly to ensure you don't fall foul of legislation.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about setting up a private limited company in the United Kingdom, it may be a great idea to call me on 01908 774320 and let's see how I can help.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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