{"id":177003,"date":"2022-10-12T13:26:59","date_gmt":"2022-10-12T12:26:59","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=177003"},"modified":"2023-05-16T03:43:30","modified_gmt":"2023-05-16T02:43:30","slug":"incorporating-your-startup","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/startups\/incorporating-your-startup\/","title":{"rendered":"Incorporating Your Startup in the UK"},"content":{"rendered":"

Incorporating your startup means that your business becomes a legal entity with a separate legal identity from you, the business owner. As a business owner in England, you may be exploring the possibility of incorporating your startup. This article will explain some of the key pros and cons of incorporating your startup business. It will also advise on when the best time for incorporation might be for your business.\u00a0<\/span><\/p>\n

Incorporation\u00a0<\/span><\/h2>\n

Incorporating a startup means that you create a new company, which becomes the owner of the business and all of its assets. You will no longer directly own the business assets. Instead, you will own shares in the company. These shares give you various rights in the company, such as the right to receive a dividend from the company\u2019s profits. However, as a shareholder, you do not have any direct influence over the affairs of the company. This is the job of the director, which is a role you will also have.\u00a0<\/span><\/p>\n

As a director, you assume many <\/span>legal obligations<\/span><\/a>. For example, you will be responsible for filing your company’s annual accounts, as well as ensuring the company pays any corporation tax it owes. You will also have to inform Companies House about any changes you make to the company, such as changes to its share capital business.\u00a0<\/span><\/p>\n

It may sound confusing, but the law treats the role of the shareholder and director as distinct. This is despite the fact that, as a small business incorporated as a private limited company, the <\/span>owner is both a shareholder and director<\/span><\/a>.\u00a0<\/span><\/p>\n

Pros of Incorporating Your Startup<\/span><\/h2>\n

Incorporating your business comes with a number of benefits.<\/span><\/p>\n

Limiting Your Personal Liability<\/span><\/h3>\n

One of the main benefits of incorporating your business is to limit your personal liability to the business. This is in fact what the term \u201climited\u201d refers to in the phrase private limited company. Absent incorporation, there is no distinction between you and your business. But following incorporation, the business has its own legal personality, which means it can assume its own obligations. As a shareholder, these obligations do not bind you. Most importantly, if the business fails, absent fraud or misconduct, you will not have to personally meet the company\u2019s debts.\u00a0<\/span><\/p>\n

That said, the law does not treat limited liability as automatic or guaranteed <\/span>in all cases<\/span><\/a>.\u00a0<\/span><\/p>\n

Raising Capital\u00a0<\/span><\/h3>\n

Unlike other business structures, companies have share capital. This means ownership is apportioned by the number of shares held by shareholders. This makes it much easier for the business to raise capital, because owning shares automatically gives shareholders certain rights. Therefore, if you intend to approach outside investors like venture capital firms, you will want to incorporate beforehand.\u00a0<\/span><\/p>\n

Maximising Brand Image<\/span><\/h3>\n

There is something to be said for the fact that trading through a limited company gives your business brand more prestige. Larger businesses are more accustomed to dealing with limited companies. In fact, by not incorporating your business, you risk stunting your business\u2019 long-term ambitions.\u00a0<\/span><\/p>\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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