Benefits of incorporating a limited company

August 14, 2020

In wholesale suppliers business, there are various kinds of entities, such as sole trader, partnership business and limited company. A limited company is no doubt the most popular of existing business types and there are various sound reasons why traders opt for it rather than picking a partnership business or becoming a sole trader.

In sole trade, the company is dissolved as soon as the trader dies, while in partnership, the business ends as soon as one of the partners dies or walks out of the partnership. The primary reason for incorporating a limited company is the protection available to the shareholders. When it is registered as a limited company, it is declared as a separate entity.

Continues to exist

A limited company would continue to exist until it is removed from the list of registered companies. Its existence remains static while the ownership or management can change. In sole ownership, it ceases to exist if the owner dies, stops trading, or hands over the autonomy to someone else.

Transfer of shares and Business credibility

Shares can be easily transferred or sold at any time. This makes the wholesale manufacturers to easy sell their company as the whole shares can be transferred instantly. While in partnership business, the shares or any other stocks cannot be transferred. Besides shares, as compared to the credibility of other two types, the credibility of a limited company is higher in the local and international market. This credibility accentuates the profits and structure.

Control of Shareholders

In limited companies, the shareholders practice real control. These shareholders are sometimes appointed as the directors or get other prominent posts. The positions depend on the share of shareholders. The biggest shareholder gets the position of managing director. In many larger companies, most of the shareholders are not responsible for daily operations. Thet may also participate in elections or removals of directors or any other high-level posts. This gives them an ultimate control over the company as they elect the director.

Taxation Benefits

In sole ownership business or partnership business, the owners pay income tax. In this scenario the whole profit is considered proprietors income regardless of how much profit is spend on working capital. While, the directors pay income tax the company pays corporation tax. The benefit is that the corporation taxes are much lower than income taxes, which ultimately benefits it.

Protected Business Name

When a company is in sole ownership or partnership, its name and trademark is not legally protected. Anyone can take benefit of the situation and steal the name and/or logo. When it is incorporated as limited company, the registration itself legally protects the name and no one else can incorporate the company s name with similar spelling or sound. In limited company, itself becomes the owner.

If it falls, the shareholders' liability is limited to the amount they have contributed. Besides, the personal assets of Wholesalers, distributors, manufacturers or directors and shareholders also cannot be used for paying debts.

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