By If you are in business, sometimes you are required to make some hard decisions. If you operate as a single trader or in partnership, you can consider changing business into a limited company. The main benefit associated with the Company is a limited liability that is awarded to shareholders and company officers. For unlimited businesses or single traders, personal assets stand up if business failure occurs. This does not happen with the company, as long as they operate legally, the personal assets of shareholders or directors are not at risk at the turning point and recipient. However, they are some of the challenges that are experienced in forming companies including:
· Higher administration & law fees
Forming a limited company attracts higher administrative costs, which includes new systems & accounting records, new paye systems, new stationery, new tax references and new VAT registration. Furthermore, establishing a limited company requires management to submit a tax return. Therefore, customers, service providers and suppliers need to be informed about changes in limited company status. Some service providers can choose to stop working with companies as a result of changes.
· Account must comply with the Company Act Requirements
The limited company tax position needs to be analyzed carefully. Annual account needs to comply with the company’s Act requirements. Therefore, the law audit may be needed for the company with a turnover of more than £ 6.5 million. Audit involves work that exceeds and above the audit carried out for single traders or partnerships.
· Account submitted for public views
Limited company accounts need to be submitted to be seen publicly. Therefore, annual returns are usually delivered with company registrants with filed archiving fees, as well. Failure to submit a company return on timely interesting penalty.
· Tax on profit
The company is subject to tax on profits, each accounting period is subject to income tax on this year as in the case of a single merchant or partnership. The company is expected to file a tax refund for each accounting period.
· Tax implications for funds drawn
A non-mobile business can introduce and attract cash without the possibility of tax implications. On the other hand, funds drawn from the company raises tax obligations.
· Criminal / civil rejection
The company director slaps the risk of civilian or criminal punishment for example to slow down account or violate bankruptcy rules.
