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Company Formations: What They Are And What They Involve
Author : Stewart Wrighter
Submitted : 2012-02-21 Word Count : 7 Popularity: Not Rated
Tags: company formations, legal services, law, uk, shareholders agreements, registered service office
British business is supporting an increasing number of small business owners, who hold a good proportion of many markets; the most noticeable being construction and internet services, but the realm of small business can include any sector. However, while you may operate as an individual, its important for your business both practically and legally that youre viewed as a company. Plus, company growth is easier to achieve once youve taken the first step to company formation. Below are outlined some of the reasons why any small trader or small business might want to consider this process.
Theres nothing wrong with starting small. After all, billionaire business magnates such as Topshops Sir Philip Green, Virgins Sir Richard Branson, and TVs Sir Alan Sugar, James Caan and Duncan Bannantyne began their working lives as individuals trading in a self-employed business. These are some of the richest people in Britain, but many of them including Richard Branson and Alan Sugar started their business careers doing low-paid, unqualified work. Company formations are key here: Branson and Sugar would be nothing without Virgin and Amstrad.
Having taken the crucial step of company formation, a trader moves from being simply a self-employed worker to being in control of a company larger than just him or herself. As a company, your work and you will be viewed more professionally. People are more likely to trust a company, because however small it is, a company reflects someone behind the service who is serious about his or her work.
Company formations are taken for various reasons, most obvious that comes to peoples minds generally being tax purposes. This can be a useful aspect of the process, although you should talk to an accountant about this, as not all company formation automatically means lower tax. It will mean though, for instance, that youll be able to start paying yourself expenses, allocating yourself company cars and so on, without paying the same amount of tax that you would pay if buying those things independently.
The real advantage of company formation is ownership and financing. Again, its easy to return to Dragons Den to illustrate this point. However apparently hapless the contestants may seem, all of them have formed a company or are willing to do so. This is because in order to secure investment, you have to be prepared to give up a part of your business. Of course, thats impossible when youre simply trading as a self-employed person. But after becoming a company, its relatively easy to sell shares in return for financing. This doesnt have to relate to multi-million pound deals; even if, for instance, you want to work with a family member, the easiest method by far of shared ownership is to form a company and issue shares.
Finally, company formations remove a degree of liability. Separating your business a little from yourself means that you are not wholly responsible for any debts incurred by the company. Thus it can work as a kind of insurance: if the company does badly, youll lose your investment, but hopefully wont have to give up things in the rest of your life to pay company debts.
For all these reasons, company formation frequently makes good sense any small trader or self-employed person should seriously considering it. There are packages available which take care of the process for you online, and come with a range of benefits beyond complying with your legal obligations.
Author's Resource Box
Matthew Kemp wrote the above article about company formations and found the following website useful http://www.companieshouse.gov.uk/about/gbhtml/gbf1.shtml
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