Creating The Buffer Of Limited Liability
In the world of Global market, there are international laws that control the flow of business around the globe. When people from two different cultures interact, they have to have some boundaries that protect each others interests. There have to be some sort of accountability between one another which will ensure that neither of them will be the looser in the deal and both of them will stand to make the appropriate benefit from the proposition. If a person is a sole trader or any other non- limited business then there is a huge possibility that their personal assets can come under the risk of dissolution under the dire circumstance of the fall of business enterprise. The case is reversed when the group becomes a limited company which helps protect people from unlimited risk that can be thrust upon them. If the company operates by the book and upholds the laws of the land then the personal assets of the directors as well as the shareholders will not come under any risk even in the event of winding up or receivership. It is absolutely essential for a organization to become a limited company because many large organizations do not prefer to engage any relationship with non- limited companies. Being a limited company gives reassurance to partners, suppliers and customers, which is an essential component for building a proper business image in the world of business.
Limited company advantages also include the fact that they can begin commerce trading within any set time after it has been set up; hence it is a low cost way to set up a good business name. There is an advantage of setting up a limited company which protects the brand name, as it cannot be used by any other company in the world. Taxes are paid separately for the company, directors and employees because the company becomes a separate entity in the eyes of the law. If the company dissolves then the assets of the company are used to pay off the debts and the people of the company are not held liable for the damages caused by the company itself. The shareholders also have limited liability which extends to the limit of the unpaid shares they hold.
However if people work beyond the limits of Limited company advantages then they cannot remain under this law, e.g people start trading as a sole trader, partner or partnership then their income is taxed as proprietors income.
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When considering the advantages of a private limited company registration against retaining self employed status the decision taken by a sole trader is often entirely focused upon the tax advantages. There are other private limited company advantages and also disadvantages particularly in regard to limited company accounts and administration compared to producing a simple set of sole trader basic accounts.
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