Establishing a company in the UK 

Forming a company in the United Kingdom is easy and has several advantages. The UK offers several facilities to businesses of all forms.  

Limited liability of shareholders 

The status of limited liability offers shareholders the security that the maximum that can be lost in the form of investment in a company is the initial amount invested. Unlike the sole-proprietorship and partnership companies, the limited liability shareholders are not personally responsible for the settlement of dues to the company’s creditors, including employees.  

Legal identity 

The company enjoys the legal status of a person, as far as its obligations are concerned. Therefore, if the company is liquidated or dissolved, only the assets owned by the business can be auctioned to settle the liabilities. The shareholders enjoy immunity from such obligations or responsibilities that are not the result of their decisions.  

Corporation tax 

Private businesses, such as sole-proprietors and partnerships, and individuals are taxed on their total income earned during the taxable period. Public and private limited companies are taxed on their profits (revenues less expenses) and at a flat rate of corporation tax, varying on the size and sales revenue of the company. The employees of the company, which include the directors and secretaries, are taxed on an individual basis on their income and benefits earned in the tax year.  

Continuity 

An individual private business or a partnership usually ceases existence once a member retires, withdraws or expires. The business may continue provided the new team of members, which may include the existing and/or new members, agree to continue. A company is not bound by a select team of directors to manage the affairs. Shareholders elect members to the board of directors in the annual general meeting, which forms the strategic management wing of the company.  

Separate owners and managers 

In a limited liability company, there is a divorce between the ownership (shareholders) and the management (directors). This is beneficial where directors are able to work in the best interest of the company as a whole and not specifically for the interests of shareholders, which is maximisation of shareholder wealth. The shareholders however, can elect members to the board of directors in the annual general meeting for every year of operation.