Incorporating a Company

Often they started trading without seeking advice and, even when the business has grown over time, may not consider reviewing their trading structure. 

 

Changing the way a business is organised is something many will not consider until it is too late, but the value for getting it right and making that change should not be underestimated.

 

The primary benefit to forming a limited company or limited liability partnership (LLP) is that it offers protection for the company's owners. 

 

As a separate legal entity a company or LLP can enter into contracts in its own right. Ultimately, if the company or LLP then gets into difficulties, the personal assets of shareholders and directors will be protected.

 

Setting up a company or LLP can be surprisingly inexpensive, with prices in the low hundreds for a basic incorporation.

 

It is important though that proper tax advice is sought before deciding which route to take and an accountant will be able to indicate which is likely to be the most beneficial trading structure. 

 

Trading through a company can also allow investors to take different shareholdings, meaning ownership can properly reflect the intention of all parties from the outset.

 

In addition it is always advisable for anyone forming a company or LLP to consider a shareholders' or partnership agreement, to govern their relationship going forward, although it is not a legal requirement.

 

Getting the structure right from the outset can ensure many problems which might arise can be avoided. 

With the cost far less than many assume it should be considered as it may prove one of the wisest investments that any new start up or existing sole trader or partnership can make.

 

* James Wharton is a solicitor in the company law team at BHP Law in Darlington. He can be contacted on (01325) 466794.

 

The company law team’s next column on April 20 will focus on Protecting your IP when (starting) trading.