Company and business law is a specialist subject so, when starting up a new venture, it's a good idea to talk to the people with the experience. When we start a company to do business, the most common reason is to separate the enterprise risk from our own personal and family assets. This means it's possible to limit the amount of money that a business owner can owe personally.
One of the most popular and successful types of enterprises is a limited liability company. This option has several advantages over a partnership or a company with sole trader status.
1. Forming a limited liability company means you can protect the name of your enterprise. When your establishments name has been registered, no one else can take that name. This is not the case with sole traders and partnerships, who do not have access to a register where they can protect their establishments name.
2. A limited liability company is a separate legal entity from any of its shareholders, which means that a shareholder can enter into a contract with the firm. Shareholders may be employed by the firm and may loan money to the enterprise in the same way as any other unrelated party can do. This also means that the shareholders' liability for losses is normally limited to their share of the enterprise ownership.
3. With a limited liability establishment, it is much easier to attract funds and investment. There are several different ways to raise capital with a limited liability company. This can include the issuing of new shares which are purchased by new shareholders to bring capital into the venture. Capital can also be raised by offering the firm as security or collateral for a mortgage or debenture that the company takes on. This allows more options and more security for the lender. Companies can secure a loan more cheaply and more easily than individuals.
4. A limited liability company means that it is possible for a shareholder to have their lending to the enterprise secured by a debenture. If the company then finds itself in financial troubles and is wound up, the debenture holder would be first in line ahead of unsecured creditors when the residual assets are distributed.
5. Having a limited liability company ensures the continuity of the venture, even if one particular shareholder wants to sell or transfer part or all of their shares to another party. This also makes it much easier to sell the whole company or pass it on to someone else as a separate entity.