Making your company a private limited company is one of the best decisions that you can take as an entrepreneur.

It is a good thing to want to become or to actually become an entrepreneur. A lot of people in the society actually want to do this and studies have shown that having a conducive environment for businesses to thrive in is one of the ways of boosting the economy of a state or country. It also boosts business awareness and interest among the general populace.

However, starting up these ventures or businesses is not an easy task at all. As a matter of fact, statistics show that majority of businesses fail in their first year. This tells you that it is not an easy task setting up and running a business. 

There are many reasons why a business may fail or not do as well as it was expected. Among the many reasons why this might happen is the lack of understanding about business structure. Here, the challenge is; should I operate as a single trader or form a limited company?

The answer to this question is that you should choose a limited company.

What Is A Private Limited Company?

This is a company or business entity that is privately owned and the liability is limited to the shares of the owner. A private limited company does not trade its shares publicly, as a matter of fact, its shareholders are limited to fifty shareholders and should never exceed that limit. All private limited companies have the acronym LTD attached to their name.

Why Open A Private Limited Company?

There are various reasons and advantages to opening a private limited company, some of them are:

The Liability Is Limited

A company acquires a legal persona that is distinct from the founder or owner of the company therefore, it is the company that makes profits and suffers losses. The limited liability there only means that the owner only suffers liability to the extent of the capital or investment already put in the company. This distinction can mean a whole lot and make a whole lot of difference for a business but lots of traders and business owners do not know this and therefore lose personal assets if they fall into debt.

It Is Tax Efficient

The law (the Tax code particularly in this instance) gives certain exemptions to companies. This is done because the government recognizes that businesses create jobs and are generally the backbone of the economy. A private limited company pays a Corporation Tax that is just pegged at 19% while a trader will pay a tax on all earnings which might be up to 45% in some instances.

The Company Is Taxed Not You 

This is one of the major reasons why people are encouraged to open a private limited company. When you open a private limited company, your income as an individual is basically separate from the company’s income. Therefore, your company’s income and not your personal income gets taxed. Thus, you only pay an income tax when it is established that you as a person have earned an income.

Transparency

There is a structure that a private limited company must follow or adopt as they have to be registered (incorporated). This system ensures that the company is efficiently and legally run and also gives investors to confidence to want to invest in your organization. This is because, they can find out the details of your company, how things are run and how transactions are done and if impressed, would want to invest.

Your Brand Is Protected

The process of registering a company ensures that no two brands or names are the same. This prevents anyone or organization from contesting or taking your brand or name. It also ensures that you are unique such that clients or customers will not mistakenly patronize another organization though they had you in mind. 

Conclusion

Running a business might be difficult however, knowing how to have it effectively setup for decreases the hardship involved. This is why you should seek for proper advice and register your business or open as a private limited company.

 

By Gracefield Maxcot

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